Calculate new total surplus in partnership in equilibrium

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Reference no: EM133255510

Assignment:

(a) Compute the efficient level of effort.

(b) Suppose the partners decide to share output equally between themselves. What is the equilibrium level of effort? Compare the answer to the first part.

(c) Suppose partner 1 decides to leave the firm. The three remaining partners share output equally after partner 1 leaves. Compute the new total surplus in this partnership in equilibrium. Is this more or less than the surplus from part b above? Why is this the case?

Reference no: EM133255510

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