Final answer:
To calculate the incremental effect on profit if MSI eliminates the POP product, one must analyze the redistribution of fixed costs to other products and consider the impact of changes in both quantity and price due to market conditions such as labor costs and consumer preferences.
Step-by-step explanation:
The question addresses the incremental effect on profit if the Post Office Polka (POP) product were to be eliminated by a company named MSI. The key consideration is to understand that, according to MSI's assessment, the elimination will not impact the sales of other products, and any fixed overhead allocated to POP would be redistributed to the remaining products. When looking at the effect on quantity, we see that higher labor compensation and a shift in consumer preferences away from traditional mail services (referred to as snail mail) both lead to a decrease in the equilibrium quantity of Postal Services, which is represented as a shift to the left in the supply-demand graph. This reduction in quantity is typically associated with a shift in both cost of production and consumer tastes.
However, the effect on price is more complex. Higher labor costs suggest an increase in equilibrium price, while a decrease in demand for snail mail implies a lower price. Without knowing the magnitude of these shifts, it is not possible to predict the overall impact on equilibrium price. In economics, when both supply and demand curves shift, the effect can typically be determined on either price or quantity but not both simultaneously.