If a salesperson is paid by the volume of sales he or she makes, then the
A) moral hazard problem is diminished.
B) moral hazard problem is enhanced.
C) adverse selection problem is enhanced.
D) there is no effect on the moral hazard problem.

Question

Quizplus · Accepted Answer

Paying a salesperson based on sales volume aligns their incentives with the company's goals, reducing the likelihood of shirking or not working in the company's best interest, thus diminishing the moral hazard problem.

If a Salesperson Is Paid by the Volume of Sales