DeShawn's Detailing Is a Service That Details Cars at the Customers

question 98

Multiple Choice

DeShawn's Detailing is a service that details cars at the customers' homes or places of work.DeShawn's cost for a basic detailing package is $40, and he charges $75 for this service.For a total price of $90, DeShawn will also detail the car's engine, a service that adds an additional $20 to the total cost of the package.Should DeShawn continue to offer the engine detailing service?

• A)Yes, he still makes a profit by selling the engine detailing service with the basic detailing package.
• B)Yes, but only if he raises the price of the basic detailing package.
• C)No, his marginal benefit is less than his marginal cost.
• D)More information is needed for DeShawn to make this decision.

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Definitions:

Monopoly Power

The ability of a company or entity to control the price and supply of a product or service, due to the lack of competition in the market.

Long-run Equilibrium

A state in which all factors of production and costs are variable, and economic agents have fully adjusted to any economic changes, leaving no incentives for further adjustments.

Minimum Average Cost

The lowest point on the average cost curve, signifying the most efficient scale of operation for a firm.

Decreasing Cost

Decreasing cost refers to a situation where costs fall as the scale of production increases, often due to efficiencies or benefits gained from economies of scale.