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

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:​

Quizplus · Accepted Answer

The Hound Dog Bus Company should offer this service because the additional revenue ($275) exceeds the additional cost of the service ($250, which is the variable cost of the trip). Therefore, the company will earn a positive economic profit.

The Hound Dog Bus Company Contemplates Expanding Its New Mexico