-Al Works as a Sales Clerk at a Department Store

question 143

Essay

-Al works as a sales clerk at a department store for a fixed salary of $2,500 per month. He is offered a job as a salesperson at a car dealership in which there is a 50 percent chance that he will make $5,000 a month and a 50 percent chance that he will make only $1,000 a month. The figure above Al's utility of wealth curve:
a) What is Al's expected income from the offered job?
b) What is Al's expected utility from the offered job?
c) Will Al accept the offer? Why or why not?
d) What is the minimum fixed salary for which Al will continue to work for the department store and not accept the dealership's offer?

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Definitions:

Compensation Role

The function of compensation in an organization, focusing on how it attracts, motivates, and retains employees through monetary and non-monetary rewards.

UNICEF Store

Retail operations or online shops that sell products to raise funds for UNICEF's missions and programs focused on children's welfare globally.

Chicken-Processing Plant

A facility dedicated to the slaughtering, processing, and packaging of chicken products for consumer consumption.

Tree-Planting Firm

A company specializing in planting trees as part of reforestation efforts, environmental projects, or landscaping services.