Suppose that Tommy Hilfiger's marginal cost of a jacket is $200 and at one of the firm's shops, total fixed costs are $500 a day. The profit-maximizing number of jackets sold in this shop is 30 a day. Then the shops nearby from other retailers start advertising their jackets. The Tommy Hilfiger shop decides to spend $1500 a day advertising its jackets, and its profit-maximizing number of jackets sold jumps to 60 a day.

(i)What is the shop's average total cost of a jacket sold before the advertising begins?

(ii)And after advertising?

(iii)Before advertising: Suppose that the price elasticity of demand is 2. Can you say what happens to the price of a Tommy Hilfiger jacket? And to the markup? Please, compute the number of maximal profits.

(iv)After advertising: Suppose that the price elasticity of demand equals 6. Can you say what happens to Tommy's economic profit?