Question

last month, loblaws pulled its flyers in response to concerns that newsprint could help spread the virus. canadian tire temporarily paused distribution of its flyers. walmart canada paused its print flyer for two weeks early in the covid-19 pandemic but has resumed production. metro inc. said the company plans to maintain its loblaw pulls its flyers but continues to advertise online and increases its market expenditure, how will loblaws cost and revenue curves and economic profit change?does average total cost at the profit-maximizing output increase or decrease?

Answer 1

If Loblaw effectively replaces print flyers with online advertising and increases market expenditure, the average total cost could decrease, and economic profit may potentially increase, depending on the effectiveness of the online marketing strategy.

Step-by-step explanation:

When Loblaw decides to pull its flyers and shift towards online advertising while increasing its market expenditure, it impacts its cost and revenue curves, and consequently, its economic profit. The company might experience a decrease in its average total cost (ATC) at the profit-maximizing output if it can reduce marketing costs by transitioning to more cost-effective digital means. If online advertising is effective at driving sales, then the revenue may remain stable or even increase. Therefore, economic profit can either increase if the reduction in costs outpaces any potential loss in revenue or decrease if the opposite occurs.