This question refers to the Jenkin\'s Hot Air Balloon Rides data above Instead o

Question

This question refers to the Jenkin's Hot Air Balloon Rides data above Instead of a rent increase, govenment regulators demand safety improvements which forces Jenkins to spend an extra $30.000 PER RIDE. Which of the following is true: Jenkins will lower its price in order to stimulate demand and maximize profits Since marginal costs are increasing, Jenkins will increase its price and lower the number of rides in order to maximize profits Jenkins will do nothing and keep its profit maximizing price and number of rides the same Jenkins will go out of business

Explanation / Answer

The correct answer is option (B). Since marginal costs are increasing, Jenkins will increase its price and lower the number of rides in order to maximize profits. The increase in the cost of the security improvements would tend to increase the cost of the service. It then provides an increase in the revenues in the business.

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