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.Which of the following statements about Scheme II is false?

Question

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.Which of the following statements about Scheme II is false?

Quizplus · Accepted Answer

Scheme II has an earnings floor, which means that no worker would get less than $160 per day regardless of the number of windshields installed. Therefore, it is less risky for senior employees who may not be able to work as fast as younger workers but still earn a consistent wage. Thus, the statement "It is more risky for senior employees" is false.

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