Suppose a firm is currently selling 1,000 units of output at a price of $8 per unit and has an advertising budget of $400. Suppose further that the firm can sell one more unit of output by either a $0.02 price discount or by a $8.00 increase in advertising expenditure. Is the firm’s advertising budget optimal? If not, determine the optimal advertising budget.
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- Suppose a firm is currently selling 1,000 units of output at a price of $8 per unit and has an advertising budget of $400. Suppose further that the firm can sell one more unit of output by either a $0.02 price discount or by a $8.00 increase in advertising expenditure.
- Is the firm’s advertising budget optimal?
- If not, determine the optimal advertising budget.
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- Suppose that the demand function of a new face cream is described by the demand function: Q(P, A) = P -1/2A 1/4 , where Q represents the quantity demanded, P represents price, and A represents advertising expenditures. (i) Compute the price elasticity of demand (eD) and the advertising elasticity of demand (eA ). (Please show your detailed calculations).you own a small cineplex theater with 200 seats. the demand for seats is Q=3000-20P. you are charging rm6.50 per ticket and selling tickets to 160 people. your costs are fixed at rm125 and do not depend on the number of people attending. should you cut your price to fill the theatee? explain. what other pricing policies might you use to increase your profits?Suppose that the Blinn College Deli is currently selling 500 chef salads per day when the price is $5. Suppose that the own-price elasticity of demand for chef salads is -0.8. As the Deli manager you decide to lower the price by $0.50. Which of the following is most likely to happen? Chef salad sales will fall by approximately 8% and total revenue will be lower. Chef salad sales will rise by approximately 8% and total revenue will be higher. Chef salad sales will fall by approximately 8% and total revenue will be higher. Chef salad sales will rise by approximately 8% and total revenue will be lower.
- Suppose you are in charge of pricing at your company and you wish to increase revenues from your product line. Your company's chief economist informs you that the price elasticity of demand of your product line is estimated to be E = - 1.1 Based on this information, what would you do?Your firm is considering entering a new territory. From market research, you have obtained the following demand function that explains how your price (P in dollars) and advertising (A in thousands of dollars) choices influence the quantity demanded (Q in thousands of units). Q = 20 - 6P + 2A To enter the new market you plan on running $10,000 worth of ads. The marginal cost of producing your product is $1 per unit. 3a) What is your profit maximizing price, quantity sold, and profit?Practice #6 Francine is a a dental floss tycoon living in Montana. She faces the following demand curve for her product: Price ( in $/unit) Quantity demanded 2.50 1000 2.20 2000 1.90 3000 1.60 4000 1.30 5000 1.00 6000 .70 7000 .40 8000 Francine has been told by her brother, who is currently taking a marketing class, that if she lowers her price by one increment(for example; changing price from .70 to .40, she will capture market share and increase total revenue. All of her advisors within the company have assured Francine that her brother's advice may be correct, BUT the above demand curve will not change. Assume that Francine knows the above demand curve will not change and is also considering her brother's advice. The prices can only change in…
- You are a manager of an advertising company. The company is running short of funds, so you decide to increase revenue. should you increase or decrease the price of funning ad? explainAT&T. It is early in the days of cellular (or mobile) telephony, and you are the price manager for AT&T's cell phone plan. It has been determined that there are two market segments: low-value consumers and high-value consumers. For simplicity, assume that all consumers within a segment are identical. A consumer in the low-value segment has monthly demand (measured in number of minutes) of Q, (p) = 80 - p, and a consumer in the high-value segment has monthly demand of QH (P) = 100 -p, where p is in cents per minute. a. Assume AT&T charges a flat price per minute with no membership fee. Derive the expression for consumer surplus for a low-value consumer and for a high-value consumer as a function of the price, p. Low-value consumer surplus, CS, (p): = High-value consumer surplus, CS, (p) = Show Transcribed Text Assume AT&T's marginal cost is a constant 10 cents per minute. You have decided to use a two-part tariff and must choose the monthly fixed fee f and the per-minute charge p. There…A garden store determines the following demand function during early summer for a certain size of tomato plant: x= D(p) = 2p+300/10p+11, where x is the number of plants sold per day when the price is p dollars per plant. a) Find the elasticity of demand. b) Find the elasticity when p =$3 per plant. c) At p=$3, will a small increase in price cause the total revenue to increase or decrease?
- 4. An economic consultant provides a firm's marketing manager with the following estimate of the demand function for the firm's product: Qx = 1240 – 3.13Px - 0.611P, + 2.01M + 0.30AX Px = the price of the firm's product per unit; Py = the price of another good per unit; M = money income for the average consumer; Ax = advertising costs for the firm's product. The demand function shown above indicates that: A. The firm's good (X) and the other good (Y) are substitutes and that X is an inferior good B. The firm's good (X) and the other good (Y) are complements and that X is an inferior good C. The firm's good (X) and the other good (Y) are substitutes and that X is a normal good D. The firm's good (X) and the other good (Y) are complements and that X is a normal goodA firm has estimated the following demand function for its product: Q = 258 - 2 Px + 0.101 + 1.0 P, + 14A, Where Qx is the quantity demanded of X per month (in thousands), P is the price of X, I is an index of consumer income, Py is the price of competing product Y, and Ax is the advertising expenditures for X per month (in thousands). Assume that Px = 10, I = 120, Py = 10, and A, = 10. The Income Elasticity of Demand (E) is: A. 3 B. 0.3 0.03 0.003The ABC Computer Company spends a lot of money on advertising designed to convince you that its personal computers are superior to all other personal computers. If the ABC Company is successful, A) the demand for ABC personal computers and the demand for other firms' personal computers will become more price elastic. B) the demand for ABC personal computers will become less price elastic but the demand for other firms' personal computers will become more price elastic. C) the demand for ABC personal computers will become more price elastic but the demand for other firms' personal computers will become less price elastic. D) the demand for ABC personal computers and the demand for other firms' personal computers will become less price elastic.