One of the Potential Negative Side Effects of Pay in the Form

question 270

Multiple Choice

One of the potential negative side effects of pay in the form of sales commissions is

• A) a greater incentive for salespeople to engage in unethical or fraudulent sales practices that may eventually cause legal problems for the firm.
• B) increased volatility of sales revenue for the firm.
• C) the potential that pay levels may get so high that they will increase a firm's marginal wage cost more than its marginal revenue product.
• D) an increased likelihood of shirking by workers.

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Definitions:

Fee Increase

An adjustment that results in the rise of charges or fees for services or goods.

Social Discount Rate

The rate used to convert future costs and benefits to their present value in order to make decisions regarding public projects.

NPV Calculations

The process of determining the net present value of cash flows by discounting them to the present value using a specific rate.

Carbon Tax

A tax imposed on carbon dioxide emissions, designed to reduce the use of fossil fuels and lower greenhouse gas emissions.