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ABC Motors, a used car dealership, is considering offering a 30-day warranty on all its cars. The average cost of repairs for cars that need
ABC Motors, a used car dealership, is considering offering a 30-day warranty on all its cars. The average cost of repairs for cars that need fixing within 30 days is $500. The dealership believes that offering the warranty will attract more customers and increase sales. However, they are unsure about the potential impact on their profit margins. Assume that 80% of the dealership's cars are in good condition and will not require any repairs within 30 days, while 20% of the cars are lemons and will require repairs within that timeframe. Without the warranty, the dealership's average willingness to sell (WTS) price for a car is $10,000. Which of the following statements best describes the likely impact of the 30-day warranty on the dealership's WTS price? Disregard any administrative costs associated with managing the warranty program
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