mgr econ 9 - 3A=R 7,200=1,200A S= 206,400 6=A A = 6 R = 18...

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5. The manager of a firm estimates that the sales of her firm are related to radio and newspaper advertising in the following way: S = 12,000 + 1,800(A x R) where S = number of units sold A = number of quarter-page newspaper advertisements R = number of minutes of radio spots a. Derive the marginal benefit of newspaper and radio advertising on the number of units sold. MB A = __ 1,800R___ MB R = __ 1,800A _________ b. If the newspaper ads cost $600 per quarter-page ad (P A =$600) and the ratio ads costs $200 per minute (P R = $200), find the combination of ratio and television ads that maximizes sales when the advertising budget is $7,200. Also compute the optimal level of sales. 1,800A/600=9A/3 7,200=600A+200R 7,200=600(6)+200R S=12,000+1,800 (6x18) 1,800R/200=3R/3 7,200=600A+200(3A) 3,600=200R 12,000+ (108) 9A/3=3R/3 7,200=600A+600A 18=R 12,000+194,400
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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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mgr econ 9 - 3A=R 7,200=1,200A S= 206,400 6=A A = 6 R = 18...

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