If a Salesperson Is Paid by the Volume of Sales

question 55

Multiple Choice

If a salesperson is paid by the volume of sales he or she makes, then the

• A) moral hazard problem is diminished.
• B) moral hazard problem is enhanced.
• C) adverse selection problem is enhanced.
• D) there is no effect on the moral hazard problem.

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Definitions:

Takeover Bid

An attempt by a competitor to obtain a controlling interest in a corporation.

Board of Directors

A group of elected or appointed members who jointly oversee the activities and governance of an organization or company.

Legal Obligation

A duty enforced by law, requiring an individual or entity to adhere to a prescribed conduct.

Accredited Investors

Individuals or institutions that meet certain financial criteria and are therefore allowed to invest in certain types of complex and higher-risk financial products.