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:

Question

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Explanation:Average total cost = (Total cost) / (Number of coats sold)Initial average total cost = (3000 + 150 * 15) / 15 = $320New average total cost = (3000 + 1500 + 150 * 25) / 25 = $300Therefore, the average total cost falls by $20 per coat.

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