Consumers value the product- specific services for a new smartphone at $25 and the marginal cost to the retailers for providing the product- specific services is $20. If the retailers provide the product- specific services, which of the following is true?

Question

Quizplus · Accepted Answer

The value consumers place on the product-specific services is greater than the cost to the retailers of providing those services, indicating that there will be an increase in demand for the product if the services are provided. However, since the marginal cost of providing the services is less than the value consumers place on the services, retailers will choose to provide the services, creating a shift in the market supply. Since the increase in demand is less than the increase in supply, the shift in the market demand will exceed the shift in the market supply.

Consumers Value the Product- Specific Services for a New Smartphone