Question

Ford executives announced that the company would extend its most dramatic consumer incentive program in the company’s long history—the Ford Drive America Program. The program provides consumers with either cash back or zero percent financing for new Ford vehicles. As the manager of a Ford franchise, how would you expect this program to impact your firm’s bottom line?

a. Profits likely will not change in the short or long run.

b. Profits likely will increase in the short run but return to normal in the long run as rivals respond with similar plans.

c. Profits likely will fall in the short run and remain low for the long run.

d. Profits likely will increase in the short run and stay high for the long run regardless of rivals' responses.

Answer 1

B) with this scheme , ford will earn high profit in the short run as consumers will find it convenient to buy ford car @0% interest. But in the long run as profits are high , fords competitors will respond by implementing their own scheme , so that the profits return to normal. Like GM implementing same scheme.