Despite Evidence That Companies Will Find It More Profitable to Use

Multiple Choice

Despite evidence that companies will find it more profitable to use a commission system of compensation rather than a salary system, many companies continue to pay their workers salaries.Which of the following is one reason why firms choose a salary system?

A) Most business owners and managers are not trained economists; therefore, they are unaware of the research that shows a commission system is more profitable than a salary system.
B) Firms often use salary systems to overcome their principal-agent problems.
C) Firms that have salary systems do not have to use compensating differentials to attract employees to do hazardous jobs.
D) Many workers dislike risk and prefer to be paid a salary rather than to be paid by commission.