Allison's Auto Art is a company that applies pinstripes to vehicles.Allison's cost for a basic 1-color pinstriping job is $35, and she charges $95 for this service.For a total price of $175, Allison will apply a fancier 3-color pinstripe application to an automobile, a service that adds an additional $40 to the total cost of the package.Should Allison continue to offer the 3-color pinstripe application?
A)Yes, she still makes a profit by selling the 3-color application.
B)Yes, but only if she lowers the price of the 1-color application.
C)No, her marginal benefit is less than her marginal cost.
D)More information is needed for Allison to make this decision.

Question

Quizplus · Accepted Answer

To determine if Allison should continue to offer the 3-color pinstripe application, we need to compare the costs and revenues associated with it.

For the basic 1-color pinstripe job, Allison charges $95 and incurs a cost of $35, resulting in a profit of $60.

For the fancier 3-color pinstripe job, Allison charges $175 and incurs a cost of $75 ($35 for the basic job plus $40 for the additional colors), resulting in a profit of $100.

Since the profit from the 3-color job is higher than the profit from the basic job, Allison should continue to offer the 3-color application. Therefore, the correct answer is A.

Allison's Auto Art Is a Company That Applies Pinstripes to Vehicles.Allison's