Consumers value the product- specific services for a new smartphone at $20 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

If the retailers provide the product-specific services, it will increase the value of the smartphone for consumers by $20. Therefore, the demand for the smartphone will increase by $20, resulting in a shift in the market demand curve. The cost of providing the product-specific services is $20, which means the marginal cost of producing the smartphone has also increased by $20. As a result, the supply curve will shift to the left by $20. Since the shift in the market demand equals the shift in the market supply, the answer is C).

Consumers Value the Product- Specific Services for a New Smartphone