Ed Was Recently Hired as a Salesman for a National

question 164

Multiple Choice

Ed was recently hired as a salesman for a national consulting firm.His job involves spending a significant portion of his time out of the office visiting prospects and attending conferences.His firm is paying him a wage that is higher than the equilibrium wage,but he receives much of his income in quarterly bonuses based on how much he sells.

• A) The consulting firm is trying to prevent adverse selection with its compensation strategy.
• B) Ed has an incentive to go golfing with his buddies rather than conducting sales meetings.
• C) The consulting firm is responding to the moral hazard problem with its compensation strategy.
• D) Ed should quit this job and take a job where he gets paid an equilibrium wage more frequently.

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Definitions:

Hatshepsut

An 18th dynasty Pharaoh of Egypt who reigned during the early 15th century BC, one of the few female monarchs in ancient Egyptian history.

Royal Headdress

An ornate and often symbolic form of headgear worn by members of royalty as a sign of sovereignty and dignity.

Temple Complex

An area composed of one or more temples along with associated buildings, usually dedicated to a particular group of gods or a religious practice.

Karnak

A vast temple complex in Luxor, Egypt, renowned for its huge and intricately decorated structures, dedicated to the Theban triad of Amun, Mut, and Khonsu.