Firms Are Better Off Using Rebates Rather Than Just Lowering

question 110

Multiple Choice

Firms are better off using rebates rather than just lowering the price of a good because

• A)people view the firm in a positive light because now poorer people will be able to afford their good.
• B)customers overestimate the value of the rebate and so buy more of the good, making profits higher than if they just lowered the price.
• C)only those who place a low value on their time or are price sensitive actually redeem the rebate, making profits higher than if they just lowered the price.
• D)lowering the price is inefficient and creates additional deadweight loss.