Management Information System (MIS) Practice Exam

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What is the primary advantage of reverse auctions for buyers?

  1. Lower prices

  2. More options

  3. Faster sales

  4. Better quality

The correct answer is: Lower prices

The primary advantage of reverse auctions for buyers is that they typically lead to lower prices. In a reverse auction, instead of buyers bidding for products or services, sellers compete against each other by lowering their prices to win the buyer's business. This competitive environment drives prices down, which can result in significant cost savings for the buyer. While one might consider that having more options could be beneficial, the primary focus of a reverse auction is on the pricing mechanism rather than simply increasing the number of available choices. Although faster sales could be a potential benefit due to the streamlined process of bidding, the main outcome is the price reduction achieved through competition among sellers. As for better quality, reverse auctions do not inherently guarantee that the quality of goods or services will improve; the emphasis is primarily on reducing cost, which might sometimes lead to compromises on quality.