The Hound Dog Bus Company contemplates expanding its New Mexico operations by offering services from Raton to Santa Fe.It has estimated that the total cost of the trip will be $400,of which $150 is the fixed cost,which it has already paid.The company expects an increase in revenue by $275 from the trip.The Hound Dog Bus Co.should _____

Question

Quizplus · Accepted Answer

The decision to offer this service should be based on whether the additional revenue exceeds the additional cost of the service. In this case, the additional revenue ($275) is greater than the additional cost of the trip ($250, which is the total cost minus the fixed cost already paid). Therefore, the company should offer this service as it will generate a profit. Option E correctly states this and is therefore the best choice.

The Hound Dog Bus Company Contemplates Expanding Its New Mexico