Converse has been fairly successful selling denimcolored UK sportswear. Lydia, wanting to get in on theprofit, has also entered this market. After producingher profit maximizing level of output she finds that heraverage total cost per unit is $40, her average variablecost per unit is $30, and her selling price (forced uponher by the market), is $20. In the short run, she should:O go back to college and shut down her denim UKsportswear business.Ostay in business even though she is suffering a loss.O expand production since she is making a positiveeconomic profit.O burn down the Converse factory so she can capture theirshare of the market and make even bigger profits than theprofit she is already making.

Lydia is faced with a difficult situation in the cutthroat world of denim-colored UK sportswear. She…

Answered: Converse has been fairly successful…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose that Roots' marginal cost of a jacket is a constant $75.00 and the total fixed cost at one of its stores is $2,000 a day. This store sells 25 jackets a day, which is its profit-maximizing number of jackets. Then the stores nearby start to advertise their jackets. The Roots store now spends $1,000 a day advertising its jackets, and its profit-maximizing number of jackets sold jumps to 75 a day. What is this store's average total cost of a jacket sold before the advertising begins and after the advertising begins. >>> Answer to 2 decimal places. Can you say what happens to the price of a Roots jacket, Roots' markup, and Roots' economic profit? Before the advertising begins, the average total cost of a jacket sold in this store is $ After the advertising begins, the average total cost of a jacket sold in this store is $ If the nearby firms' advertising decreases the demand for Roots' jackets and makes the demand more elastic, the price of a Roots' jacket If Roots' advertising…
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