6) A firm's short-run revenue is given by R=10e -e², where e is the level of effort by a typical worker (all workers are assumed to be identical). A worker chooses his level of effort to maximize wage less effort w-e (the per-unit cost of effort is assumed to be 1). Determine the level of effort and the level of profit (revenue less wage paid) for each of the following wage arrangements. Explain why these different principal-agent relationships generate different outcomes. a. w=2 for e>1; otherwise w=0. b. w= 2 c. w= R-12.5
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- Geralt works for Stregobor as a witcher earning $87,000 a year. He decides to quit his job andbecome a freelance witcher. As a freelancer, he spends $7000 on herbs and weapons. Insurancecosts him $1000 a year. He pays himself $145,000 as a salary. His total revenues for the year are$191,000. Based on this information, what were his economic costs as a freelance witcher?Su Jappose that the profit function tor a com modity X)=-0.01x2+20x-1990 where 3. X13 the number of Acms sold, Find the marginal profit at x=50 and tell what ;it tems so predizds.You are working for the chiefeconomist at Microsoft. Microsoft’s only significantcosts to producing and distributing a new version itit’s operating system is $30,000 in wages to itsemployees, $15,000 in computer testing, and$5,000 in utilities. Microsoft’s marketing department estimates that thedemand a new version it it’s operating system is Q = 320 – 0.5 P, with Pmeasured in dollars.What price should Microsoft charge for a new version it it’s operatingsystem? What profit should Microsoft expect?
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