Use the following profit function (per worker) for the Blue Delta Faucet Company to answer this question. P(e) = 40e - (2e² + 100)
Note that P = firm profits and e = worker-hours per day.Assume that effort is observed perfectly.At the profit-maximizing level of effort for the firm,daily per-worker compensation will be:

Question

Quizplus · Accepted Answer

To find the profit-maximizing level of effort, take the derivative of the profit function P(e) = 40e - (2e^2 + 100) with respect to e, set it to zero, and solve for e. The derivative is 40 - 4e. Setting it to zero gives 40 = 4e, so e = 10. Substitute e = 10 back into the profit function: P(10) = 40(10) - (2(10)^2 + 100) = 400 - (200 + 100) = 100. However, the question asks for daily per-worker compensation, which is the total revenue per worker (40e) minus the cost (2e^2 + 100). At e = 10, compensation is 40(10) = 400, and cost is 200 + 100 = 300, so compensation is 400 - 300 = 100. Therefore, the correct answer is $300.

Use the Following Profit Function (Per Worker)for the Blue Delta