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

Allison's cost for the 3-color pinstripe application is $35 (cost of the 1-color application) + $40 (additional cost) = $75. She charges $175 for this service, so her profit is $175 (price) - $75 (cost) = $100.

Meanwhile, for the basic 1-color pinstriping job, Allison's profit is $95 (price) - $35 (cost) = $60.

Therefore, offering the 3-color pinstripe application still yields a profit for Allison, even though it involves more costs. Thus, she should continue to offer it.

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