Description of this paper

The table shows the relationship for a hypothetical firm

Description

solution


Question

The table shows the relationship for a hypothetical firm between its advertising expenditures and the quantity of its out-put that it expects it can sell at a fixed price of $5 per unit.;Advertising Quantity Sold at P = $5/IN;Expenditures (millions) Million Units;$1 8;$1.2 9;$1.4 9.4;$1.6 9.6;$1.8 9.7;a. In economic terms, why might the relationship between advertising and sales look the way it does?;b. Assume that the marginal costs of producing this product (not including the advertising costs) are a constant $4. How much advertising should this firm be doing? What economic principle are you using to make this decision?

 

Paper#31634 | Written in 18-Jul-2015

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