The Hound Dog Bus Company contemplates expanding its New Mexico operations by offering service from Raton to Milk-of-Magnesia.The total cost of the trip would be $400, of which $150 is fixed cost, which it has already paid.The firm expects to earn $275 in revenue from the trip.The Hound Dog Bus Co.should

Question

Quizplus · Accepted Answer

The Hound Dog Bus Co. should offer this service because the added revenue of $275 exceeds the added cost of $250 (total cost of $400 minus fixed cost of $150). Therefore, the company will earn a positive economic profit from this service.

The Hound Dog Bus Company Contemplates Expanding Its New Mexico