Which salary maximizes the productivity of the car dealer

Reference no: EM13241638

Suppose that a car dealership wishes to see if efficiency wages will help improve its salespeople's productivity. Currently, each salesperson sells an average of one car per day while being paid $20 per hour for an eight-hour day.

a. Suppose that if the wage is raised a second time to $40 per hour, the number of cars sold rises to an average of 2.5 per day. What is now the labor cost per car sold?

b. If the firm's goal is to maximize the efficiency of its labor expenditures, which of the three hourly salary rates should it use: $20 per hour, $30 per hour, or $40 per hour?

c. By contrast, which salary maximizes the productivity of the car dealer's workers (cars sold per worker per day)?

Reference no: EM13241638

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