The owners of a small manufacturing concern have hired a vice president to run the company with the expectation that he will buy the company after. five years. For the first $150,000 of profit, the vice president's compensation is a flat annual salary of $50,000 plus 50% of company profits. Beyond the first $150,000 in profits, the vice president's compensation is the salary he receives at $150,000 profit plus 20% of company profits in excess of $150,000. On the following graph, use the purple points (diamond symbols) to plot the vice president's salary as a function of annual profit, for the profits levels of $0, $50,000, $100,000, $150,000, $200,000, $250,000, and $300,000. MANAGER SALARY (Thousands of dollars) 250 225 200 175 110 125 100 25 50 Total VP Salary

The owners of a small manufacturing concern have hired a vice president to run the company with the expectation that he will buy the company after. five years. For the first $150,000 of profit, the vice president's compensation is a flat annual salary of $50,000 plus 50% of company profits. Beyond the first $150,000 in profits, the vice president's compensation is the salary he receives at $150,000 profit plus 20% of company profits in excess of $150,000. On the following graph, use the purple points (diamond symbols) to plot the vice president's salary as a function of annual profit, for the profits levels of $0, $50,000, $100,000, $150,000, $200,000, $250,000, and $300,000. MANAGER SALARY (Thousands of dollars) 250 225 200 175 110 125 100 25 50 Total VP Salary

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter17: Financial Markets

Section: Chapter Questions

Problem 5SCQ: Investors sometimes fear that a high-risk investment is especially likely to have low returns. Is...

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