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Unformatted text preview: 3A=R 7,200=1,200A S= 206,400 6=A A* = _ 6____________ R* = _ 18___________ S* __ 206,400__________ c. Suppose the advertising budget is cut so that only $4,800 can be spent on advertising. Now what are the sales-maximizing values of A, R, and S? 4,800=600A+200R 200(R) +600(4) =4,800 S=12,000+1,800(4x12) 4,800=600A+200(RA) 200R+2,400=4,800 12,000+ 86,400 4,800=1,200A 200R=2,400 98,400=S 4=A 12=R A* = ____ 4___________ R* = ____ 12_________ S*__ 98,400_______ d. Based on parts (b) and (c), what is the effect of changing the advertising budget constraint on the optimal level of sales? 206,400-98,400=10,800 7,200-4800=2,400 10,800/2,400 45 Positive effect because the increase in budget would increase the sales and it could also mean that a decrease in budget would decrease the sales....
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- Spring '10