A good salesperson can sell 200,000 worth of goods, while a poor ...

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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.

[Zack0mack0101@yahoo.com]

Answer to Question 1

B

Answer to Question 2

C

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TYSM

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Excellent