Refer to the Article Summary. What happens to the profit a car ...

[RYAN BANYAN]

Refer to the Article Summary. What happens to the profit a car company makes on each car sold if it offers incentives such as discounts, cash rebates, or lease incentives to customers? How might a car company decide which of these strategies to use
 
  What will be an ideal response?

Question 2

An efficiency wage
 
  A) is lower than the market wage and tends to decrease productivity.
  B) is higher than the market wage and tends to decrease productivity.
  C) is lower than the market wage and tends to increase productivity.
  D) is higher than the market wage and tends to increase productivity.

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Answer to Question 1

Offering cash rebates, discounts, or lease incentives will each decrease profits. Offering any of these incentives will, effectively, increase the average total cost for the company. In deciding which of these strategies to use, the firms will probably assess consumer demand to see which approach consumers prefer.

Answer to Question 2

D