Karen sells web design services. She can choose two effort levels: low or high. Low effort costs Karen $100 and high effort costs Karen $175. Low effort results in $500 in sales whereas high effort results in $700 in sales. Based on this information, which of the following statements are TRUE. Select ALL that apply.

Question 6 options:

	For a commission-pay scheme to get Karen to work hard, her company would need to give her a 37.5% commission (A = 0.375).
	If the firm gives Karen a 20% (A = 0.2) commission, she will choose low effort.
	If the firm gives Karen a 15% (A = 0.15) commission, she will quit her job.
	If the firm pays a fixed wage of $300, Karen will put forth high effort.
	For a commission-pay scheme to get Karen to work hard, her company would need to give her a 25% commission (A = 0.25).
	It's better for the firm to pay Karen a high commission rate and incentivize her to put forth high effort.
	Karen will never choose High effort at any commission rate.
	The lowest fixed wage the firm can pay to Karen without her quitting her job is $50.
	It's better for the firm to pay Karen a low commission rate and let her put forth low effort.

Question 7 (1 point)

Stephen works in commercial real estate, selling plots of undeveloped land to construction firms for his company. He can choose between two effort levels: Low and High. Low effort costs him $5200 and high effort costs him $14000 . When he puts forth low effort, his sales are $39000; when he puts forth high effort, his sales are $50000.

The company decides to implement a commission pay scheme. Given the information above, what is the lowest commission rate the firm can pay Stephen to compensate him for high effort effort ("AH", the commission rate that keeps Jason from quitting under the high effort choice)?

Type your answer in the space provided. Do not include "$" or ",". The commission rate should be expressed in units (e.g. 0.15, not 15%). Round your number to two digits (e.g. 0.1685 = 0.17)

Your Answer:

Question 7 options:

Answer

Question 8 (1 point)

Jason works in commercial real estate, selling plots of undeveloped land to construction firms for his company. He can choose between two effort levels: Low and High. Low effort costs him $3400 and high effort costs him $12000 . When he puts forth low effort, his sales are $47000; when he puts forth high effort, his sales are $68000.

The company decides to implement a commission pay scheme. Given the information above, what is the lowest commission rate the firm can pay Jason to compensate him for low effort ("AL", the commission rate that keeps Jason from quitting under the low effort choice)?

Type your answer in the space provided. Do not include "$" or ",". The commission rate should be expressed in units (e.g. 0.15, not 15%). Round your number to two digits (e.g. 0.1685 = 0.17)

Your Answer:

Question 8 options:

Answer