Rodrigo operates a dry-cleaning service and charges customers $5 per article of clothing.Based on his knowledge of operations,the 1,000 th piece of clothing costs him $4.95 to dry-clean.If he takes additional business,however,the 1,001st piece will cost $5 for the service.Does he take the additional business?
A) No,he has hidden costs that far exceed his estimate of $5,so he loses money.
B) No,taking on additional business doesn't earn him any money.
C) Yes,if he turns away business,his service will be forced to close.
D) Maybe.If a competitor is accepting that many customers,he must at least equal that amount.
E) Yes.At a $5 cost,he breaks even and is indifferent.He necessarily turns away business when the cost of the additional unit exceeds the income.

Question

Quizplus · Accepted Answer

At a cost of $5, Rodrigo breaks even and is indifferent to taking on additional business. However, if the cost of the additional unit exceeds the income, he must necessarily turn away the business. Therefore, taking on the additional business is a viable option for Rodrigo. Option A, B, C, and D are all incorrect as they do not take into account Rodrigo's break-even point or financial feasibility of taking on additional business.

Rodrigo Operates a Dry-Cleaning Service and Charges Customers $5 Per