Terri's production of custom-made windows is the sum of her effort e and a random term...

  

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Terri's production of custom-made windows is the sum of her effort e and a random term u. Each one of the five values of u from -2 to +2 is equally likely. Terri earns a bonus of $50 if her daily production reaches 11 windows; that is, Aw = 50 if and only if e+u >11. (a) Suppose Terri supplies 10 units of effort per day. Which of the five values of the random variable u enable Terri to earn the $50 bonus? (b) If e = 10, what is the probability that Terri earns the bonus? (c) If e = 11, what is the probability that Terri earns the bonus? (d) For the marginal increase in effort from e = 10 to e = 11, Terri's expected gain in wages is MB₂ = $ per day. VMP (S/unit) 75 50 25 0 250 500 750 1000 MC 1500 effort (units/year) Terri's production of custom-made windows is the sum of her effort e and a random term u. Each one of the five values of u from -2 to +2 is equally likely. Terri earns a bonus of $50 if her daily production reaches 11 windows; that is, Aw = 50 if and only if e+u >11. (a) Suppose Terri supplies 10 units of effort per day. Which of the five values of the random variable u enable Terri to earn the $50 bonus? (b) If e = 10, what is the probability that Terri earns the bonus? (c) If e = 11, what is the probability that Terri earns the bonus? (d) For the marginal increase in effort from e = 10 to e = 11, Terri's expected gain in wages is MB₂ = $ per day. VMP (S/unit) 75 50 25 0 250 500 750 1000 MC 1500 effort (units/year)

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