Honda Motor Company is considering offering a

$2,000

rebate on its minivan, lowering the vehicle's price from

$29,400

to

$27,400.

The marketing group estimates that this rebate will increase sales over the next year from

41,000

to

56,400

vehicles. Suppose Honda's profit margin with the rebate is

$5,310

per vehicle. If the change in sales is the only consequence of this decision, what are its costs and benefits? Is it a good idea? Hint: View this question in terms of incremental profits.

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