In Recent Years, the "Fax Attack" Model of Car Shopping

question 31

Multiple Choice

In recent years, the "fax attack" model of car shopping has become popular. In a "fax attack," a customer sends a fax to every car dealership within a certain radius listing the make and features of the car they would like, along with the price they are willing to pay, and asks dealerships that will match that price to contact the customer. In essence, the customers set both the features and the price for the car. McCall Automotive has experienced a sharp increase in the number of fax attacks, and Phil, the sales manager, is seeking methods for addressing the situation. Phil is also concerned about the dealership's positioning strategies and market share.
-Phil believes that the dealership should lower car prices to capture a higher share of the market. Which statement best supports Phil's argument?

• A)Short-term profits will not be affected by lower prices if a firm is an e-retailer.
• B)Competitors will lower prices to gain market share,and a price war will ensue.
• C)Firms with large market shares are publicly owned but less strictly monitored.
• D)A temporary reduction in profits could lead to long-term future profits because of greater market share.
• E)A company with the largest share of the market can cut costs and raise prices without the public noticing or switching to competitors.

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Definitions:

Drug Test

A drug test is a technical analysis of a biological specimen that's used to detect the presence or absence of specified parent drugs or their metabolites.

Moral Hazard

Moral hazard occurs when there is a lack of incentive to guard against risk where one is protected from its consequences, often after entering into a contract or agreement.

Deductible

The amount paid out of pocket by the policyholder before an insurance company covers a claim.

Full Replacement Value

An insurance term referring to the amount necessary to replace damaged or lost property with new items of like kind and quality without deducting for depreciation.