A firm's revenue is R = 100q – 4q2 and cost is C = %3D 100 + 20q. The owner of the firm offers two alternative compensation packages to the manager: 1) 40% share of the company's profit or 2) 20% of the company's revenue. Which package will the manager choose?

A firm's revenue is R = 100q – 4q2 and cost is C = %3D 100 + 20q. The owner of the firm offers two alternative compensation packages to the manager: 1) 40% share of the company's profit or 2) 20% of the company's revenue. Which package will the manager choose?

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter1: Introduction: What This Book Is About

Section: Chapter Questions

Problem 2MC

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Question

A firm's revenue is R = 100g - 4q2 and cost is C =
%3D
100 + 20g. The owner of the firm offers two
alternative compensation packages to the
manager: 1) 40% share of the company's profit or
2) 20% of the company's revenue. Which package
will the manager choose?

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