Question 1 Consider AF from our previous Comprehension Assessment. It was among a handful of firms, engaged in a monopolistically competitive market. Let's assume that the ad elasticity of the demand facing AF is 0.3. Also, assume that that the price elasticity of the demand facing AF is -1.4. How much should AF invest in advertisement per one dollar of sale? About 15 cents About 17 cents About 19 cents About 21 cents Question 2 All else being constant the price elasticity of the demand facing AF increases (in its absolute value). It goes from -1.4 to -1.6. The optimal amount of ad investments, per dollar of sale, would then: increase by 25% increase by 12.5% ○ decline by 12.5% decline by 25%
Question 1 Consider AF from our previous Comprehension Assessment. It was among a handful of firms, engaged in a monopolistically competitive market. Let's assume that the ad elasticity of the demand facing AF is 0.3. Also, assume that that the price elasticity of the demand facing AF is -1.4. How much should AF invest in advertisement per one dollar of sale? About 15 cents About 17 cents About 19 cents About 21 cents Question 2 All else being constant the price elasticity of the demand facing AF increases (in its absolute value). It goes from -1.4 to -1.6. The optimal amount of ad investments, per dollar of sale, would then: increase by 25% increase by 12.5% ○ decline by 12.5% decline by 25%
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter10: Monopolistic Competition And Oligopoly
Section: Chapter Questions
Problem 16CTQ: Would you rather have efficiency or variety? That is, one opportunity cost of the variety of...
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