Question

A salesperson can use regular levels of effort to make a sale (30% chance of success),...

A salesperson can use regular levels of effort to make a sale (30% chance of success), or they can make a stronger effort and increase their chances of success to 60%. The extra effort costs $60 more than the regular effort for the salesperson. How much should salesperson's employer provide as a bonus to assure strong sales effort? A. $60 B. $120 C. $200 D. $300

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Answer #1

Solution: $200

Working:

A. $60 [$60 bonus earned 60% of the time would not offset a $60 cost of effort.]

B. $120 [60% * 120 - $60 = 12. It is lower than the extra cost

C. $200 [60%* $200 - $60 = 60. It equals the extra cost]

D. $300 [60%* $300 - $60 = 120. It exceeds the extra cost]

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