Ly Tien believes that his remodeling contractor is overcharging him for materials. Specifically, Ly can get exactly the same item, sometimes even from the same store, for 20 to 30% less than what the contractor charges. Upon further investigation, Ly finds out that most skilled workers such as electricians and tile masons earn about $15 to $20 per hour. Yet, Ly’s contractor bills out labor at $302$45 per hour.

Required:
a. What might explain the difference between the contractor’s charge for materials and the price at the retail store? Would a similar rationale apply for labor costs as well?
b. Contractors typically get 30 to 40% of the jobs that they bid on. Yet, many contractors will submit a bid free of charge, even though it may take them a full day’s work to assemble a bid. What are the costs and benefits of asking the potential customer to pay for the work required to assemble a bid?