View Your World, a high- end window manufacturer, directly pays all of the transaction costs. The managers of View Your World are considering the profit- maximizing location for their plant. If locating the plant closer to its customers saves $7,000 in transportation costs of its windows to its customers, but causes an additional $7,500 in input transportation costs, View Your World______ locate its plant closer to its customers as the marginal benefit is ______than the marginal cost.
A)should not; more
B)should; less
C)should not; less
D)should; greater

Question

Quizplus · Accepted Answer

The marginal benefit of moving closer to the customers is $7,000 (savings in transportation costs), but the marginal cost of doing so is $7,500 (additional input transportation costs). Since the marginal cost is greater than the marginal benefit, View Your World should not locate its plant closer to its customers.

View Your World, a High- End Window Manufacturer, Directly Pays