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

question 283

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:

Matching Hypothesis

A theory suggesting that people are more likely to form and succeed in a committed relationship with someone who is equally socially desirable.

Operant Conditioning

A method of learning where the potency of certain actions is changed via positive reinforcement or negative punishment.

Prejudicial Stereotypes

Oversimplified and widely held beliefs about a particular group of people that are often negative and unfair.

Insidious

Proceeding in a gradual, subtle way but with harmful effects, often without being noticed until it is too late.