A good salesperson can sell $100,000 worth of goods, while a poor one can sell only $10,000 worth of goods. Job applicants know if they are good or bad, but the firm does not
A firm will offer job applicants a choice between a fixed salary of $2,000 or a commission on the sale. Assume risk-neutral salespersons and no opportunistic behavior. Given that the firm wants to distinguish a prospective good salesperson from a poor one, what should be the commission on sales? A) Commission should be larger than 50%.
B) Commission should be larger than 40%.
C) Commission should be between 2% and 20%.
D) Commission should be smaller than 2%.
C
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American consumers learn that grape consumption can reduce the incidence of heart disease. Everything else being equal, this will cause the
A. price of grapes to fall and decrease the quantity supplied. B. supply of grapes to fall and the quantity demanded to increase. C. quantity supplied of grapes to fall. D. demand curve for grapes to shift to the right and increase the quantity supplied.
The nominal interest rate is 7 percent and the expected inflation rate is 4 percent. The real interest rate is:
A) 10 percent. B) -2 percent. C) 3 percent. D) 4 percent.
The problem of a complex tax code filled with loopholes may be overcome by proposing a complete overhaul of the entire system that lowers taxes for everyone because it _____
a. represents a Pareto superior move b. takes advantage of rational ignorance c. benefits all special interests d. a and b
If France is capable of producing either cheese or wine or some combination of those two products, then France should:
A. produce the one it is more efficient at producing. B. produce the one for which it has a comparative advantage. C. produce the one for which it has a higher opportunity cost. D. remain self-sufficient if it has the absolute advantage in the production of both.