A Manager Has a Utility Function U = C ⁰

question 6

Multiple Choice

A manager has a utility function U = C ^0.5 if she doesn't work hard and U = C ^0.5 - 1 if she does.Expected profit will increase from 1,500 to 1,600 if she works hard.The manager receives compensation C equal to 81 plus a portion x of any profit in excess of 1,500.What is the value of x that will make the manager indifferent between shirking and working hard?

• A) 0.09.
• B) 0.105.
• C) 0.19.
• D) 0.242.
• E) None of the above.

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Definitions:

Endocrine Gland

A gland that secretes hormones directly into the blood or tissue fluid instead of into ducts. Compare with exocrine gland.

Exocrine Gland

A gland that excretes its products through a duct that opens onto a free surface, such as the skin (e.g., sweat glands). Compare with endocrine gland.

Pancreas

A gland in the digestive and endocrine systems of vertebrates that produces digestive enzymes and hormones, including insulin.

Intracellular Receptors

Proteins located within the cell cytoplasm or nucleus that bind to specific molecules and trigger cellular responses.