If it costs View Your World, a high- end window manufacturer, $20 per window to install a higher quality glass in its windows and consumers will pay an additional $28 per window for the improvement, which of the following is true?
A)View Your World should not install the higher quality glass because the marginal revenue from the quality enhancement is less than the marginal cost.
B)View Your World should not install the higher quality glass because the marginal revenue from the quality enhancement exceeds the marginal cost.
C)View Your World should install the higher quality glass because the marginal revenue from the quality enhancement exceeds the marginal cost.
D)View Your World should install the higher quality glass because the marginal revenue from the quality enhancement is less than the marginal cost.

Question

Quizplus · Accepted Answer

View Your World should install the higher quality glass because the marginal revenue from the quality enhancement exceeds the marginal cost. The additional cost per window is $20, but consumers are willing to pay an additional $28 per window. This means that View Your World will generate a profit of $8 per window from the quality enhancement. Thus, the marginal revenue from the quality enhancement exceeds the marginal cost, making it a profitable investment for the company.

If It Costs View Your World, a High- End Window