Figure 14.5 Figure 14.5 Shows Two Different Compensation Schemes for the Safelite

Figure 14.5

Figure 14.5 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 $160 per day based on an 8-hour workday. Qmᵢn represents the cut-off point under the hourly-wage system: if a worker installed fewer than Qmᵢn windshields, the worker got fired. Scheme II represents a piece-rate scheme with an earnings floor: no worker would get less than $160 per day (for an 8-hour workday) and would have to produce at least Qmᵢn. For any output level beyond Q* the worker earned an additional $20 for each unit produced.
-Refer to Figure 14.5.Under Scheme I,

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