Use the Information Below to Answer the Following Questions

question 54

Multiple Choice

Use the information below to answer the following questions.
Fact 14.3.2
Suppose that Tommy Hilfiger's marginal cost of a jacket is $100 (a constant marginal cost) and at one of the firm's shops, total fixed cost is $2,000 a day. The profit-maximizing number of jackets sold in this shop is 20 a day. Then the shops nearby start to advertise their jackets. The Tommy Hilfiger shop now spends $2,000 a day advertising its jackets, and its profit-maximizing number of jackets sold jumps to 50 a day.
-Refer to Fact.14.3.2. If advertising decreases demand and makes demand more elastic, the price of a Tommy Hilfiger jacket ________. If advertising increases demand and makes demand less elastic, the price of a Tommy Hilfiger jacket ________. If price falls, markup ________. If price rises, markup ________.

• A)falls; rises; rises; falls
• B)rises; falls; falls; rises
• C)falls; rises; falls; rises
• D)rises; falls; rises; falls
• E)falls; rises; does not change; does not change

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