Calvin Is a Custom Picture Framer

question 126

Multiple Choice

Calvin is a custom picture framer.His total fixed cost is $110 a day,and his average variable cost is $1 a frame.He is maximizing his profit by selling 22 picture frames a day for $6 a frame.Few people know about Calvin's Framery.Calvin thinks that if he spends $10 a day on advertising,he can increase his market and sell 44 picture frames a day for $6 a frame.If Calvin's belief about the effect of advertising is correct,he

• A)cannot increase his economic profit by advertising because advertising increases his average total cost.
• B)cannot increase his economic profit by advertising because advertising increases his total cost.
• C)can increase his economic profit by advertising.
• D)can increase his economic profit by advertising only if he raises the price of a picture frame.
• E)can increase his economic profit by advertising only if he can lower his total variable cost.

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Definitions:

Emotional Behavior

Actions and reactions that are influenced by and express one's emotions, which can affect interpersonal relationships and decision-making processes.

Motivation

The psychological drive or force that initiates, guides, and maintains goal-oriented behaviors.

Factor Analysis

A statistical method used to identify underlying variables, or factors, that explain the pattern of correlations within a set of observed variables.

Reaction Tendencies

refers to habitual patterns of behavior, thought, or emotional response to particular situations or stimuli.