The marginal revenue from an additional dollar spent on advertising if the firm is currently spending $1,000,000 on advertising.

Question

Bavarian Crystal Works designs and produces crystal wine decanters for export to international markets. The marketing manager of Bavarian Crystal Works estimates the demand curve for each month to be: P=1,000-0.0025Q where Q is the number of wine decanters produced annually. Bavarian Crystal Works also pays a lease for its factory and equipment every month in the amount of $1,000,000. Finally, the cost to produce each wine decanter is $200. What is the marginal revenue at 40,000 units? If Bavarian Crystals is currently producing 40,000 units would you recommend they increase their production?

Answer 1

Question

Chapter 10, Problem 9E

a)

To determine

To Calculate: The marginal revenue from an additional dollar spent on advertising if the firm is currently spending $1,000,000 on advertising.

b)

To determine

To calculate: The level of advertising would recommend to Jordan’s management.

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