Automobile Manufacturers Often Use Incentive Programs,including Special Financing Rates and Cash

question 12

Essay

Automobile manufacturers often use incentive programs,including special financing rates and cash rebates,to increase sales.However,a customer is usually restricted to choosing either the low financing rate or the rebate,but not both.Is this an example of price discrimination? If so,what type? Explain your reasoning.

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Definitions:

Fixed Cost

Costs that remain constant in total regardless of changes in the volume of activity or production level.

Cost Per Unit

The average cost to produce one unit of a product, calculated by dividing total production costs by the number of units produced.

Activity Level

A measure of the volume or quantity of work performed or production achieved in a specific period.

Account Analysis

A thorough review of accounting records to understand and verify the accuracy of transactions and financial statements.