6. The production function for a process is x = 16(e1 + e2) if e₁ and e2 are both greater than zero,if either equal zero, then x = 0. The effort exerted by team member i is e; and x is measured indollars. The sharing rule is that they split the yield of their joint effort in half. Team member i'sutility is given by u; = m; - 2e, where m is income. The marginal disutility of effort for teammember i is 4ei.(a) Find the efficient effort levels, production, and utility levels.(b) What is the outcome associated with their partnership (effort and income levels)?(c) What is the maximum amount that these two team members would be willing to pay someoneto monitor their effort levels? Assume that the monitor has a big enough whip to completelystop any shirking.

(b) The outcome associated with their partnership (effort and income levels).The outcome associated…

Answered: 6. The production function for a…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A factory manufactures both toy boats and toy trucks. It costs $125 to make a toy boat and $175 to make a toy truck. The factory only has $3,000 available to put into their production. If B is the number of boats made, and T is the number of trucks made, which of the following will be a Lagrangian equation if you are trying to maximise profits? a.120 + 5B + 7T = 0 b.120 - 5B - 7T = 0 c.0 = 120 - 5B + 7T d.0 = -120 - 5B - 7T e.120 + 5B - 7T = 0
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