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.

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Definitions:

Habitual Behaviors

actions that are regularly performed as part of one's routine, often without conscious thought due to repetition over time.

Ink Pens

Writing instruments that use ink to leave a mark on the surface, typically paper.

Neutral Stimulus

An environmental event that initially does not elicit any intrinsic response until it is associated with an unconditioned stimulus, leading to a conditioned response.

Pavlov

A Russian physiologist known for his research in classical conditioning, demonstrating how stimuli can trigger a conditioned response.