Consider the salary of Mary Sue Nelson,a sales agent for Plain Truth Advertising.Her weekly compensation package is ,where Q is her dollar volume of sales.Her productivity is ,where e denotes her hours of effort and µ,is a random variable with mean 0.If Mary Sue works an additional hour,the expected value of her wages rises by:

Question

Quizplus · Accepted Answer

To find out how Mary Sue's expected compensation changes with an additional hour of effort, we need to calculate the marginal productivity of effort (MPE):

MPE = ∂W/∂e

Taking the partial derivative of the given compensation function with respect to effort, we get:

MPE = Q/20 + 2µ/5

Since µ has mean 0, we can ignore it for the purposes of calculating the expected change in wages due to an additional hour of effort. Thus:

ΔW = MPE x Δe = (Q/20) x 1 = Q/20

So for Mary Sue, an extra hour of effort increases her expected compensation by Q/20 dollars. Without more information about Q, we can't say for certain what this value is, but we do know that it is positive (since Q is the dollar volume of Mary Sue's sales, and we would expect higher sales to lead to higher compensation). Of the answer choices given, only B ($80.00) is a plausible candidate.

Consider the Salary of Mary Sue Nelson,a Sales Agent for Plain