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    Question

    In a locality, all the local electricians follow a

    cost-plus method to charging fees for their services. The electrician charges for all items used in the work, and adds a set percentage.Which of the following statements, if true, would be the best basis for a criticism of "cost-plus" pricing as an economically beneficial method for customers of the electrician's service?
    A Some past clients have criticized the quality of the electrician's work. Correct Answer Incorrect Answer
    B The electrician does not charge for labor costs, despite the extensive time requirements of some repair jobs. Correct Answer Incorrect Answer
    C It is in the economic interest of the electrician to use expensive items, even if their use is not warranted by the circumstances. Correct Answer Incorrect Answer
    D The "cost-plus" pricing method has been used by other electricians in the region. Correct Answer Incorrect Answer
    E The percentage added to the cost of an item has decreased over the past several years. Correct Answer Incorrect Answer

    Solution

    As per the argument, electricians in an area decide the fees they charge for their services as a certain percentage of the cost of the items used in performing their services. This means higher the cost of those items, higher would be the fees received by the electrician. In such a case, it would be in the interest of the electrician to use the most expensive items even if they are not needed. The same criticism is given in option (c).Thus, option (3) is the right answer.

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