Use the information below to answer the following question.
Fact 14.3.1
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 14.3.1. 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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