Trisha's Fashion Boutique is considering a profit sharing arrangement with her employees. Currently, the employees receive an annual bonus. Trisha can sell all the output she produces for $150 per unit. Trisha's total cost function (including bonus payments to employees) is: The marginal cost function is: The profit sharing plan would pay employees 30% of profits. However, due to greater cost saving initiatives from employees, Trisha's total cost function becomes: The relevant marginal cost function becomes: Which plan offers Trisha the greatest profits for herself?

Question

Trisha's Fashion Boutique is considering a profit sharing arrangement with her employees. Currently, the employees receive an annual bonus. Trisha can sell all the output she produces for $150 per unit. Trisha's total cost function (including bonus payments to employees) is:  The marginal cost function is:  The profit sharing plan would pay employees 30% of profits. However, due to greater cost saving initiatives from employees, Trisha's total cost function becomes:  The relevant marginal cost function becomes:  Which plan offers Trisha the greatest profits for herself?

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The Answer of Trisha's Fashion Boutique is considering a profit sharing arrangement with her employees. Currently, the employees receive an annual bonus. Trisha can sell all the output she produces for $150 per unit. Trisha's total cost function (including bonus payments to employees) is:  The marginal cost function is:  The profit sharing plan would pay employees 30% of profits. However, due to greater cost saving initiatives from employees, Trisha's total cost function becomes:  The relevant marginal cost function becomes:  Which plan offers Trisha the greatest profits for herself?

Trisha's Fashion Boutique Is Considering a Profit Sharing Arrangement with Her