Mel's House of Cars is an automobile dealership that sells both new and used cars. Two other dealerships located near Mel's pay their salespeople a straight salary - they receive no commission for each car they sell.
Mel has decided to pay all of his salespeople a commission on all car sales. Which of the following is most likely to occur as a result of Mel's decision?
A) Mel will experience a principal-agent problem. Some of his salespeople will tend to shirk because they will not be paid if they sell no cars, regardless of how hard they work.
B) Mel will be able to hire some of the most productive salespeople who work for the other two dealerships.
C) Mel risks violation of federal law that regulates firms' compensation policies.
D) Mel will have difficulty finding salespeople. Research by labor economists has found that most employees prefer the security of a salary to the uncertainty of being paid based on how much revenue they generate for their employers.
Question 2
Refer to Figure 16-6. If Sensei charges the competitive price for his classes, what is the maximum amount of admission fee that he can collect from his customers?
A) the area A + C + D + G + H B) the area A + B
C) the area A + B + C + D D) the area A + B + C + D + E
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