A good salesperson can sell $1,000,000 worth of goods, while a poor one can sell only $100,000 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 and a 20% commission. Assuming risk-neutral salespersons and no opportunistic behavior, what level must the fixed salary be so that the firm can determine
a prospective good salesperson from a poor one?
A) between $0 and $20,000
B) between $20,000 and $200,000
C) greater than $200,000
D) zero
B
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"The price of compact fluorescent light bulbs fell because of improvements in production technology. As a result, the demand for incandescent light bulbs decreased
This caused the price of incandescent light bulbs to fall; as the price of incandescent light bulbs fell the demand for incandescent light bulbs decreased even further." Evaluate this statement. A) The statement is false because the demand for incandescent light bulbs would increase as the price of compact fluorescent light bulbs fell. B) The statement is false because it confuses the law of demand with the law of supply. C) The statement is false. A decrease in the price of compact fluorescent light bulbs would decrease the demand for incandescent light bulbs, but a decrease in the price of incandescent light bulbs would not cause the demand for incandescent light bulbs to decrease. D) The statement is false because compact fluorescent light bulbs producers would not reduce their prices as a result of improvements in technology; doing so would reduce their profits.
Consumer Sovereignty
- Describe the operation of their "National People Meter Service." How many households are used for this survey?
- Does this survey enhance or reduce consumer sovereignty over the choice of TV programming provided to the public?
- Why is demographic information on viewers of interest to advertisers?
- Does the availability of this demographic information enhance or reduce consumer sovereignty in the markets for the products advertised by sponsors?
Which of the following is an example of an indirect tax?
a. value-added tax b. income tax c. inheritance tax d. head tax
List some reasons why the aggregate demand curve of an economy may shift to the left