Use the information below to answer the following question.
Fact 13.3.1
Suppose that at one of the Talbots 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 Talbots 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.
-Refer to Fact 13.3.1.As a result of increased advertising,Talbots' markup
A) decreases by $100.
B) increases by $50.
C) increases by $75.
D) decreases by $60.
E) decreases by an unknown amount.
Correct Answer:
Verified
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