17. A salesperson at Joe's Exotic Pets is trying to sell iguanas. The number of iguanas that she sells depends on her effort "e" as well as her luck. Given her effort e, she will sell four iguanas with probability 4c, and only one iguana with probability (1-4e). Her personal cost of effort is 200e. The pet shop pays her a bonus b for each iguana sold. The salesperson is risk-neutral, and wants to maximize her expected utility, which is expected income minus her effort cost. If the pet shop pays b-5, how many iguanas do they expect to sell? a. 1 b. 2.5 c. 2.8 d. 3.55 c. 4

17. A salesperson at Joe's Exotic Pets is trying to sell iguanas. The number of iguanas that she sells depends on her effort "e" as well as her luck. Given her effort e, she will sell four iguanas with probability 4c, and only one iguana with probability (1-4e). Her personal cost of effort is 200e. The pet shop pays her a bonus b for each iguana sold. The salesperson is risk-neutral, and wants to maximize her expected utility, which is expected income minus her effort cost. If the pet shop pays b-5, how many iguanas do they expect to sell? a. 1 b. 2.5 c. 2.8 d. 3.55 c. 4

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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