Company 'A' hires the worker 'M' as its sales staff. 

The production function of M is Q= 80e + 𝜇 and the cost of effort for M is C_(e)= e²

Since M's effort is not observable, company A designs two contracts to offer the following compensation to the worker: 

S₁= 2000 + 0.2Q and S₂= 1700+0.3Q

a) Calculate the worker's levels of effort for each compensation scheme. (include calculations in your answers) (20 points)

b) which plan is better and motivates the employee to make more effort? Explain your answer. (10 points)