1) 2) This Question: 12 pts This Test: 88 pts 14 of 15 comp Angie bakes deliciou

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This Question: 12 pts This Test: 88 pts 14 of 15 comp Angie bakes delicious cookies. Her total fixed cost is S49 a day, and her average variable cost is $2 a bag. Few people know about Angie's Cookies and she is maximizing her profit by selling 12 bags of cookies a day for S8 a bag. Angie thinks that if she spends S90 a day on advertising, she can increase her market and sell 26 bags of cookies a day for S8 a bag. If Angie does not advertise, her economic profit/loss O If Angie decides to advertise, she expects her economic profit/loss to be S Is it worthwhile for Angie to advertise (ifher expectations are correct)? A. Yes OB. No

Explanation / Answer

and TC = TFC + TVC where TVC = AVC x Q => 2 x 12 => 24

TC = 49 + 24 => 73

Profit = TR -TC => 96 - 73 = 23

In case of advertising, TR = 26x8 => 208

TVC = 26 x2 = 52

TC = 49+ 52 + 90 => 199

Profit = 208 - 199 => 9

2. a) There are few dominant sellers in oligopolistic market.

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