What is the shops average total cost of a jacket sold

Reference no: EM13212347

Suppose that Tommy Hilfiger's marginal cost of a jacket is $100 and at one of the firm's shops, total fixed cost is $ 2000 a day. The profit-maximizing number of jackets sold in this shop is 20 a day. Then the shops nearby start to advertise their jackets. The Tommy Hilfiger shop now spends $ 2000 a day advertising its jackets, and its profit-maximizing number of jackets sold jumps to 50 a day.

a. What is this shop's average total cost of a jacket sold before the advertising begins?

b. What is this shop's average total cost of a jacket sold after the advertising begins?

c. Can you say what happens to the price of a Tommy Hilfiger jacket? Why or why not?

Reference no: EM13212347

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