Which of the Following Statements Is Least True Regarding the Use

question 7

Multiple Choice

Which of the following statements is least true regarding the use of incentive pay for sales employees?

• A)If a firm wants to tie pay to a performance measure that is affected by random factors, the firm need not compensate employees for the resulting increase in the variability of their pay
• B)In determining how closely to tie pay to performance, the firm must weigh the costs of imposing risk on risk-averse employees against the benefits of providing additional incentives
• C)When both risk and incentives are present, the optimal commission rate will reflect a tradeoff among these forces and will be somewhere between 0 percent and 100 percent
• D)Stronger incentives are called for if the variance of measured performance is lower
• E)When an employee captures all the value associated with extra effort, the employee chooses the effort level that equates the total marginal benefit of effort to the total marginal cost

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