Essay
Consider the salary of Mary Sue Nelson, a sales agent for Plain Truth Advertising. She has an effort cost of C = e2 and she a reservation wage of $1,500 so that wage package is W = 1,500 + .2 Q where the CEO sets the incentive at .2 and Q = 200 e. If the CEO increases the incentive from .2 to .25, what happens to the Nelson's effort? Will profits rise or fall?
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Under the .2 incentive, effort is 20 as ...View Answer
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