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. What is the marginal cost of adding the engine detailing to the basic detailing package?
The Marginal cost is the additional cost incurred for the production of an additional unit of output. So being the additional unit the engine, the cost of adding this extra unit is $20, as it says on the question.
A. What is DeShawn's marginal benefit if he sells a basic detailing package?
marginal benefit = marginal revenue - marginal cost = $75 - $40 = $35
B. What is the marginal cost of adding the engine detailing to the basic detailing package?
C. Should DeShawn continue to offer the engine detailing service?
Yes. From an economic point of view, a firm maximizes its accounting profit when marginal revenue = marginal cost, and since DeShawn's marginal cost is still much lower than his marginal revenue, he should continue to offer it. From a marketing point of view, this premium service (it is more expensive) may be something that a certain percent of DeShawn's clients want and if he quitted that service he might lose the clients.
DeShawn not take offer engine detailing service
cost = $40
charges = $75
total price = $90
additional charges = $20
to find out
Should DeShawn continue offer
we know here De shawn marginal benefit is
marginal benefit = total price - charges
marginal benefit = 90 - 75
marginal benefit = $15
we have given additional charges is $20
we see marginal cost here less than the marginal revenue
so DeShawn not take offer engine detailing service