Figure 17-6 Figure 17-6 Shows Two Different Compensation Schemes

question 113

Multiple Choice

Figure 17-6 Figure 17-6 shows two different compensation schemes for the Safelite Glass Corporation, an installer of auto glass windshields. Under Scheme I, the firm pays a consistent wage of $80 per day based on an 8-hour workday. Q_min represents the cut-off point under the hourly-wage system: if a worker installed fewer than Q_min windshields, the worker got fired. Scheme II represents a piece-rate scheme with an earnings floor: no worker would get less than $80 per day (for an 8-hour workday) and would have to produce at least Q_min. For any output level beyond Q* the worker earned an additional $20 for each unit produced.
-Refer to Figure 17-6.Under Scheme I

• A) workers compete with each other to see who can produce beyond Q_min in the shortest possible time.
• B) workers have no incentive to produce beyond Q_min.
• C) workers signal their productivity to the firm by consistently producing above Q_min.
• D) the incentive to increase productivity depends on where Q_min is set; if it is at a very high level, then workers will rise to the challenge for fear of losing their jobs.

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Definitions:

Trait

A characteristic or quality of an organism, which can be physical or behavioral, genetically determined or acquired.

Guilt

A cognitive or emotional experience that occurs when a person believes or realizes—accurately or not—that they have compromised their own standards of conduct or have violated a moral standard and bear significant responsibility for that violation.

Egocentricity

The inability to differentiate between one's own perspective and someone else's perspective, commonly seen in early childhood development.

Self-Esteem Fallacy

The self-esteem fallacy refers to misconceptions that high self-esteem is the primary cause of many positive outcomes or that boosting self-esteem will necessarily lead to better performance and fewer problems.