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

question 178

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 markup

• A) decreases by $100.
• B) increases by $50.
• C) increases by $75.
• D) decreases by $60.

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Definitions:

Copayment

A fixed amount that a healthcare beneficiary pays for covered medical services, usually at the time of receiving the service.

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A payment arrangement in healthcare where a provider is paid a set amount for each enrolled person assigned to them, regardless of the number of services provided.

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An individual or institution that offers healthcare services to patients.

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The insurance policy or program that pays first on a claim for medical care, determining the extent of coverage before any secondary payer contributes.