A good salesperson can sell 200,000 worth of goods, while a poor one can sell only a smaller amount 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 20,000 or a 20 commission. 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 sales amount of a poor salesperson?
A) more than 150,000
B) less than 100,000
C) more than 100,000
D) 100,000
Question 2
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.
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