Mohinder Sells Small-Business Health Insurance Programs,working on Straight Commission

question 118

Multiple Choice

Mohinder sells small-business health insurance programs,working on straight commission.Closing the sale is an extremely stressful point in the selling process for him.If he does not close the sale,the most likely outcome will be

• A) his quota will be increased.
• B) he will generate no income.
• C) his quota will be lowered.
• D) his bonus will not exceed his commission.
• E) he will get a salary reduction.

---

Definitions:

Law of Diminishing Returns

Law of Diminishing Returns states that in a production process, adding an additional factor of production, while holding all others constant, will at some point yield lower per-unit returns.

Sunk Costs

Costs that have already been incurred and cannot be recovered or refunded, and should not influence current or future decisions.

Variable Costs

Costs that change in proportion to the level of production or service activity.

Fixed Costs

Expenses that remain constant regardless of the amount of production, like lease payments or wages.