Consider the salary of Tracy, sales agent for a pharmaceutical company. Her weekly wage package is W = $1,500 + 0.4Q, where Q is her dollar volume of sales. Her productivity is Q = $500e + m, where e denotes her hours of effort and m is a random variable with expected value 0.
a. Assume Tracy's marginal cost of effort is equal to $5e.
Find Tracy's optimal choice of effort under this package. Fully explain and justify your answer.