Use the Information Below to Answer the Following Questions

question 113

Multiple Choice

Use the information below to answer the following questions.
Fact 14.3.3
Suppose that Roots' marginal cost of a jacket is a constant $125.00 and the total fixed cost at one of its stores is $1,500 a day. This store sells 20 jackets a day, which is its profit-maximizing number of jackets. Then the stores nearby start to advertise their jackets. The Roots store now spends $2,000 a day advertising its jackets, and its profit-maximizing number of jackets sold jumps to 70 a day.
-Refer to Fact 14.3.3. After the advertising begins, the average total cost of a jacket sold in this store is

• A)$200.00.
• B)$175.00.
• C)$150.00.
• D)$125.00.
• E)$100.00.

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Definitions:

Asset Liquidity

A measure of how easily an asset can be converted into cash without significantly affecting its market price.

Default Risk

The probability that a borrower fails to meet the obligations of paying back the interest or principal on a debt on time.

Nominal Wages

Wages paid to employees that have not been adjusted for inflation, representing the amount of money earned in current dollars.

Inflation Rate

The rate at which the overall price level of goods and services increases, thereby reducing the buying power.