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Consider the salary of Mary Sue Nelson, a sales agent for Plain Truth Advertising. She has an effort cost of C = e2 and she a reservation wage of $1,500 so that wage package is W = 1,500 + .2 Q where the CEO sets the incentive at .2 and Q = 200 e. Here effort is known only by the employee. There is a random shock to output each period whose mean is zero.
(a) What is the optimal effort for Mary Sue Nelson?
(b) On average, what total wage or salary will she earn each month?
(c) On average, what is the output of sales contracts that she makes?
(d) On average, what kind of profit will the CEO earn off of Nelson's work?
Tax Incidence
The analysis of the effect of a particular tax on the distribution of economic welfare among entities like consumers, producers, and the government.
Supply Curve
A graph showing the relationship between the quantity of goods that producers are willing to sell and the price of those goods.
Buyers Pay
The principle where the purchaser of a good or service is responsible for paying any tax or additional cost associated with its purchase.
Tax Burden
The total amount of tax paid by individuals or businesses, often expressed as a percentage of income or economic output.
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