Firms Are Willing to Offer Generous Rebates Because

question 98

Multiple Choice

Firms are willing to offer generous rebates because:

• A) the retailer and manufacturer always split the cost.
• B) rebates increase sales,but few customers actually apply for the rebate.
• C) they are easier for the consumer to use than are coupons.
• D) rebates are the only type of sales promotion proven to impact sales.
• E) none of these.

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Definitions:

Free-Rider Problem

A situation in which individuals benefit from resources or services without paying for them, leading to underprovision of those goods.

External Costs

Costs created by an activity that affect other parties without them being reflected in the market prices, similar to negative externalities.

Production

The process of creating goods and services through the combination of labor, materials, and capital.

Coase Theorem

A principle that if trade in an externality is possible and there are no transaction costs, bargaining will lead to an efficient outcome regardless of the initial allocation of rights.