In 2017, Tesla Motors introduced the Model 3, its first low cost model which it had hoped to sell for $35,000 but realized that it would lose several thousand dollars per car at that price. Prior to the introduction of the Model 3, Tesla's two existing models (the Model S sedan and the Model X SUV) had starting prices of over $70,000 and at those prices, the company was earning a profit on each car sold. Tesla CEO Elon Musk said that "Higher volume and manufacturing design improvements are crucial for Tesla [to sell the Model 3 at a price of $35,000]...." In deciding to increase volume and improve manufacturing design for the Model 3, Tesla
A) faced no trade-offs because it was already making a profit selling its Model S and Model X vehicles.
B) faced a trade-off between devoting additional resources to the production of the Model 3 and devoting additional resources to producing its other models.
C) was guaranteed to be able to reduce costs on its Model 3 to a point where it could sell the Model 3 at a price of $35,000 and earn a profit.
D) had no choice but to increase the selling prices of its Model S sedan and Model X SUV.
Correct Answer:
Verified
