Make the manager indifferent among shirking and working hard

Reference no: EM1331458

The solution to Utility function

A manager has a utility function U = C 0.5 if she does not work hard and U = C 0.5 - 3 if she does. Expected profit will increase from 1,000 to 1,500 if she works hard. The manager receives compensation C equal to 144 plus a portion x of any profit in excess of 1,000. What is the value of x that will make the manager indifferent between shirking and working hard?

Reference no: EM1331458

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