Quick Change and Fast Change Are Competing Oil Change Businesses

question 131

Multiple Choice

Quick Change and Fast Change are competing oil change businesses.Both companies have 5,000 customers.The price of an oil change at both companies is $20.Quick Change pays its employees on a salary basis,and its salary expense is $40,000.Fast Change pays its employees $8 per customer served.Suppose Quick Change is able to lure 1,000 customers from Fast Change by lowering its price to $18 per vehicle.Thus,Quick Change will have 6,000 customers and Fast Change will have only 4,000 customers. Select the correct statement from the following.

• A) Quick Change's profit will increase while Fast Change's profit will fall.
• B) Fast Change's profit will fall but it will still earn a higher profit than Quick Change.
• C) Profits will decline for both Quick Change and Fast Change.
• D) Quick Change's profit will remain the same while Fast Change's profit will decrease.