If a salesperson is paid by the volume of sales he or she makes,then the
A) moral hazard problem is diminished.
B) lemons problem can be screened.
C) moral hazard problem is enhanced.
D) adverse selection problem is enhanced.
E) None of the above answers is correct.

Question

Quizplus · Accepted Answer

Paying a salesperson based on the volume of sales directly aligns their incentives with the company's goals, reducing the moral hazard problem where the salesperson might otherwise not work as hard if their compensation were not tied to their performance.

If a Salesperson Is Paid by the Volume of Sales