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Compute tommy economic profit

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Reference no: EM133082834

Suppose that Tommy Hilfiger's marginal cost of a jacket is $200 and at one of the firm's shops, total fixed cost is $500 a day. The profit maximizing number of jackets sold in this shop is 30 a day. Then the shops nearby from other retailers start advertising their jackets. The Tommy Hilfiger shop decides to spend $1,000 a day advertising its jackets, and its profit maximizing number of jackets sold jumps to 60 a day.

After advertising: Suppose that the price elasticity of demand equals 6. Can you compute Tommy's economic profit?

Reference no: EM133082834

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