Suppose That at One of the Talbot's Shops, Marginal Cost

question 173

Multiple Choice

Suppose that at one of the Talbot's shops, marginal cost of a coat is constant at $150, and total fixed cost is $3,000 a day. The shop maximizes its profit by selling 15 coats a day at $500 per coat. Then the shops nearby increase their advertising. The Talbot shop responds by spending $1,500 a day more on advertising its coats. As a result, its profit-maximizing number of coats sold increases to 25 a day at $400 per coat.
-In the scenario above, as a result of increased advertising, Talbot's average total cost:

• A) Falls by $20 per coat.
• B) Rises by $50 per coat.
• C) Rises by $30 per coat.
• D) Falls by $40 per coat.

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Definitions:

Johnson's Rule

A sequencing rule used in operations management for minimizing job completion time by ordering tasks based on the shortest processing times at two workstations.

Optimal Sequence

The most efficient or effective order in which a series of tasks, events, or activities should be completed to achieve the best outcome.

Total Flow Time

The total time that a product takes to move through the entire production process, from start to finish, including processing and waiting times.

First Scheduled Job

The initial task or operation planned in a sequence of jobs for production or services.