Under which of the following situations would a seller prefer to incur the cost of improving the product quality?
A)If the increase in buyer's valuation for the improved product is higher than the cost of improving it.
B)If the increase in the seller's opportunity cost of improving the product is higher than the price of the product.
C)If the product improvement lowers the producer surplus.
D)If the product improvement allows the seller to a break even.

Question

Quizplus · Accepted Answer

In this scenario, the seller would prefer to improve the product quality if it results in a higher increase in buyer's valuation for the product than the cost of improving it. This is because the seller can charge a higher price for the improved product and capture higher profits, making it a profitable investment. A, therefore, represents the best choice. The other options are not relevant to the seller's preference for incurring the cost of improving product quality.

Under Which of the Following Situations Would a Seller Prefer