If TruLite's basic production employee receives an hourly wage of Comp = $5.00 + .10 Q where Q is the number of light switches installed per hour, then:
A) the employee can remain completely risk-averse.
B) the employee must accept risk of production variability.
C) output becomes a subjective measure of performance.
D) there are no compensating differentials.

Question

Quizplus · Accepted Answer

The hourly wage is directly tied to the number of light switches installed per hour (Q), meaning the employee's pay is dependent on their level of production. This requires the employee to accept the risk of production variability, as their pay can fluctuate based on their output.

If TruLite's Basic Production Employee Receives an Hourly Wage of Comp