Despite Evidence That Companies Will Find It More Profitable to Use

question 2

Multiple Choice

Despite evidence that companies will find it more profitable to use a commission system of compensation rather than a salary system, many companies continue to pay their workers salaries.Which of the following is one reason why firms choose a salary system?

• A)Most business owners and managers are not trained economists; therefore, they are unaware of the research that shows a commission system is more profitable than a salary system.
• B)Firms often use salary systems to overcome their principal-agent problems.
• C)Firms that have salary systems do not have to use compensating differentials to attract employees to do hazardous jobs.
• D)Many workers dislike risk and prefer to be paid a salary rather than to be paid by commission.

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Definitions:

Delay Of Gratification

The ability to resist the temptation for an immediate reward and wait for a later reward, often associated with better psychological outcomes.

Maslow's Hierarchy

A theory in psychology proposed by Abraham Maslow, depicting a five-tier model of human needs, arranged in a hierarchy, stating that as basic needs are fulfilled people become motivated to achieve higher level needs.

Culture-Specific

Refers to behaviors, norms, or phenomena that are unique or particular to a specific culture.

Overjustification Effect

A psychological phenomenon where providing an external incentive for a behavior someone already finds rewarding leads to a reduction in intrinsic motivation.