Problem
Suppose that Tommy Hilfiger's marginal cost of a jacket is a constant $100 and at one of the firm's shops, total fixed cost is $2,000 a day. The profit-maximizing number of jackets sold in this shop is 20 a day. When the shops nearby start to advertise their jackets, this Tommy Hilfiger shop spends $2,000 a day advertising its jackets, and its profit-maximizing output jumps to 50 jackets a day.
Can you say what happens to Tommy's markup and its economic profit? Why or why not?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.