Discussion Forum



1)

 In an attempt to abate the destructive decline in Micro Chip's revenue brought about by shrinking demand that is accompanying an economic recession, Micro Chip is offering customers a 50% discount for the next three months on all purchases fully paid for within 15 days.

Which of the following assumptions most underlies the chip maker's offer of a discount?


A) Micro Chip expects this discount to help the company retain existing customers and gain new ones, enabling the firm to survive in the long-term.

B) The government will provide massive technology tax credits to businesses, spurring them to purchase chips and other related products.

C) The government will not pursue Micro Chip if in fact its behavior in offering a deep discount amounts to a violation of predatory pricing laws.

D) The decrease in revenue brought about by the reduction in price will be smaller than the anticipated increase in revenue brought about by the increase

Answer:

Option D