Many automobile dealers have an operating pattern similar to that of Austin Motors, a dealer in Texas.

Question:

Many automobile dealers have an operating pattern similar to that of Austin Motors, a dealer in Texas. Each month, Austin initially aims at a unit volume quota that approximates a break-even point. Until the break-even point is reached, Austin has a policy of relatively lofty pricing, whereby the “minimum deal” must contain a sufficiently high markup to ensure a contribution to profit of no less than $400. After the break-even point is attained, Austin tends to quote lower prices for the remainder of the month.

What is your opinion of this policy? As a prospective customer, how would you react to this policy?

Dealer
A dealer in the securities market is an individual or firm who stands ready and willing to buy a security for its own account (at its bid price) or sell from its own account (at its ask price). A dealer seeks to profit from the spread between the...