MANAGERIAL/ECON+BUS/STR CONNECT ACCESS
9th Edition
ISBN: 2810022149537
Author: Baye
Publisher: MCG
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Textbook Question
Chapter 8, Problem 8CACQ
The
- Determine the firm’s optimal advertising-to-sales ratio.
- If the firm’s revenues are $40,000, what is its profit-maximizing level of advertising?
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The elasticity of demand for a firm’s product is -5 and its advertising elasticity of demand is 0.26. Determine the firm’s optimal advertising-to-sales ratio. If the firm’s revenues are 500,000, what is its profit-maximizing level of advertising?
The elasticity of demand for a firm’s product is –2.5 and its advertising elasticity of demand is 0.2.
a. Determine the firm’s optimal advertising-to-sales ratio.
b. If the firm’s revenues are $40,000, what is its profit-maximizing level of advertising?
he elasticity of demand for a firm’s product is −3 and its advertising elasticity of demand is 0.12.
a. Determine the firm’s optimal advertising-to-sales ratio.
Instruction: Enter your response rounded to two decimal places.
Numeric Response1. Edit Unavailable. not attempted, incorrect.
b. If the firm’s revenues are $60,000, what is its profit-maximizing level of advertising?
$ Numeric Response2. Edit Unavailable. not attempted, incorrect.
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- An international airline in Ghana ,Emirates ,estimates that the price elasticity of demand for business who travellers weekdays is -3,while that for vacation travellers who travel on weekends is -5 .if the aim of the airline is to maximise profit what pricing strategy will you recommend to the airline and why?arrow_forwardThe inverse demand function is p=50−0.5Q, what is the price elasticity of demand and revenue at Q=80?arrow_forwardIn an attempt to increase revenues and profits, a firm is considering a 4 percent increase in price and an 11 percent increase in advertising. If the price elasticity of demand is 1.5 and the advertising elasticity of demand is +0.6, would you expect an increase or decrease in total revenues?arrow_forward
- 8 If at the current level of advertising the firm estimates that its advertising elasticity is e ( A ) 5 , then it certainly will not be profitable for the firm to increase expenditure on advertising True Falsearrow_forwardEstimates of the marginal cost of Daraprim are $100 for a 100-pill bottle. If Turing Pharmaceuticals charged $75,000 per bottle, what is the elasticity of demand that Turing believed it faced?arrow_forwardPlotted through point E are two demand curves; one is relatively elastic, and the other is relatively inelastic. Each demand curve also has its own marginal revenue (MR) curve. Merge these curves into a kinked demand curve by moving the curves' endpoints to remove the unwanted sections of the curves. Then, adjust the marginal revenue curves to properly accompany the new kinked demand curve. Price ($) 500 450 400 350 300 250 200 150 100 50 0 0 2 4 6 E MR 2 8 10 Quantity 12 14 Demand 1 16 MR 1 Demand 2 18 80 Question 20arrow_forward
- The own price elasticity of demand is the most important determinant of pricing strategy by a firm. A firm can charge a high price for its product and earn higher revenue if the demand for its product is relatively inelastic. In other words, demand inelasticity and market power go hand in hand. What strategies should a firm adopt to make the demand for its product inelastic? Explain.arrow_forwardMNO Limited publishes a magazine targeted at urban professionals who live on the east and west coasts of the U.S., and all of the magazines are printed at a marginal cost of $0.50 per copy at a publishing plant in Kansas. If the East Coast elasticity of demand for the magazine is -1.50 and the West Coast elasticity of demand is -2, what prices should MNO Limited charge for the magazines in these two markets in order to maximize profits? A.Price should be $1.50 on the West Coast and $2 on the East Coast B.Price should be $0.50 in both markets C. Price should be $2 on the West Coast and $1.50 on the East Coast D.Price should be $1 on the West Coast and $1.50 on the East Coastarrow_forwardWhen advertising increases brand loyalty for your company's brand, then the company's demand curve becomes: horizontal. more unstable. more elastic. less elastic.arrow_forward
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Importance And Benefits Of Advertising; Author: Explified;https://www.youtube.com/watch?v=sUPdwHFO3Do;License: Standard Youtube License