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
Economics
You might also like to view...
Related to the Economics in Practice on p. 647: Surveys by the bank of England suggest that consumers tend to expect future inflation to be
A. relatively unpredictable. B. what they perceive past inflation to have been. C. directly related to the interest rate. D. equal to the actual estimates of past inflation made by the government.
Economics
The length of time until a bond matures is called the
a. perpetuity. b. term. c. maturity. d. intermediation.
Economics