Find tracy optimal choice of effort under this package

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Consider the salary of Tracy, sales agent for a pharmaceutical company. Her weekly wage package is W = $1,500 + 0.4Q, where Q is her dollar volume of sales. Her productivity is Q = $500e + m, where e denotes her hours of effort and m is a random variable with expected value 0.

a. Assume Tracy's marginal cost of effort is equal to $5e.

Find Tracy's optimal choice of effort under this package. Fully explain and justify your answer.

Reference no: EM131388831

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