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serious [3.7K]
3 years ago
13

Suppose a new car company sought to enter the rental car market, and Enterprise, Avis and Hertz responded by offering rentals ve

ry cheaply, at prices below average variable cost, in order to drive the new company out of business. What would be the problem with this plan?
Business
1 answer:
Anni [7]3 years ago
3 0

Answer: The problem of this plan is that their income will not be able to break even, because their cost price will be grater than the selling price. Which may cause the new company to wind up

Explanation: break even is a point where the cost price is equal to the selling price. This means that profit nor loss were not made.

Because Avis and Hertz are offering rentals at a prices below average variable cost, the company may not be able to meet up with capital for production of more cars, and this will cause them to wind up.

For a new company, it is always advisable to keep it's selling price a little bit above or the same with it's cost Price, because the strength not any business is the ability to produce more to fill the space of scarcity.

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Since Canada and Mexico are neighboring countries of the US, this is nearshore outsourcing. On the other hand, offshore outsourcing is a type of outsourcing that transfers the activities on to farther countries. In this example, offshore countries would be India or Ukraine.

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Read 2 more answers
“A business organization requires both long term and short term capital which can
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hope this helps
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