A group of three workers produces a good Q. The production function is Q(e1, e2, e3) = e1 + e2 + ...
A group of three workers produces a good Q. The production function is Q(e1, e2, e3) = e1 + e2 + e3 where ei is a worker's effort. They sell each unit of Q for 18 and share the revenue equally among all three workers. Each worker suffers effort costs of c(ei) = 3 * (ei)² What is the individually optimal effort level?
Homework Answers
At individual optimal effort level.
MB = MC
Marginal benefit of effort = 18/3 = 6
MC = 3*2*e = 6e
So 6= 6e
e* = 1 answer
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A group of three workers produces a good Q. The production function is Q(e1, e2, e3) = e1 + e2 + ...
A group of three workers produces a good Q. The production function is Q(e1, e2, e3) = e1 + e2 + ...
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