Suppose that the expected value of weekly profits for an ice cream shop, before paying the manager, Amy, is E(x) = 500+ 5e, where e is Amy's weekly overtime hours. Amy is risk-neutral but incurs a cost for working overtime. Thus, total expected surplus is What level of effort maximizes total surplus? The value of overtime that maximizes total surplus is e= C(e) = e² E(S)=E(¹) - C(e). hours. (Enter your response rounded to one decimal place.)
Suppose that the expected value of weekly profits for an ice cream shop, before paying the manager, Amy, is E(x) = 500+ 5e, where e is Amy's weekly overtime hours. Amy is risk-neutral but incurs a cost for working overtime. Thus, total expected surplus is What level of effort maximizes total surplus? The value of overtime that maximizes total surplus is e= C(e) = e² E(S)=E(¹) - C(e). hours. (Enter your response rounded to one decimal place.)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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