1. With no advertising, Bianca’s total revenue is $50 (10 bags at $5 a bag) and her total cost is $50 ($40 total fixed cost plus $10 total variable cost). Bianca’s economic profit is zero. With advertising expenditure of $50 a day, total revenue is $125 (25 bags at $5 a bag) and total cost is $115 ($90 total fixed cost plus $25 total variable cost). Bianca’s economic profit with no price change is

$10, so Bianca can increase her economic profit by advertising.