A good salesperson can sell $1,000,000 worth of goods,while a poor one can sell only $100,000 worth of goods.Job applicants know if they are good or bad,but the firm does not.A firm will offer job applicants a choice between a fixed salary of $25,000 or 20% commission.Assuming risk-neutral salespersons and the possibility of opportunistic behavior,will this choice of contracts allow the firm to distinguish between good salespersons and bad ones before the hiring decision is made?

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The Answer of A good salesperson can sell $1,000,000 worth of goods,while a poor one can sell only $100,000 worth of goods.Job applicants know if they are good or bad,but the firm does not.A firm will offer job applicants a choice between a fixed salary of $25,000 or 20% commission.Assuming risk-neutral salespersons and the possibility of opportunistic behavior,will this choice of contracts allow the firm to distinguish between good salespersons and bad ones before the hiring decision is made?

A Good Salesperson Can Sell $1,000,000 Worth of Goods,while a Poor