Jane Westerlund Owns a Picture-Framing Store, the Caplow Co

Multiple Choice

Jane Westerlund owns a picture-framing store, The Caplow Co. The average price she receives for a framed picture is $120. This price must cover her costs for a typical framed picture, which consists of $5 for glass, $2 for matting, $13 for the frame, and $30 for the labor involved. She must also cover monthly expenses of $1,000 for rent and insurance, $200 for heat and electricity, $500 for advertising, and $3,500 for her salary. Assuming there is no change in price or the quantity demanded, if Westerlund wants to increase her advertising expenses to a total of $1,000 (a $500 increase) , this would cause total costs to __________ and the break-even quantity to __________.

A) decrease; stay the same
B) increase; increase
C) decrease; increase
D) stay the same; increase
E) stay the same; decrease