Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN: 9781305506381
Author: James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher: Cengage Learning
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Chapter B, Problem 8E
a.
To determine
To evaluate thelevel of newspaper and magazine advertising that maximizes the firm’s sales.
b.
To determine
To evaluate thefirm’s sales at the optimal values of newspaper and magazine advertising determined in part (a).
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Bounds Inc. determined through regression analysis that its sales (S) are a function of the amount of advertising (measured in units) in two different media. This relationship is given by the following equation (X = newspapers, Y = magazines):
S (X, Y) = 200X+100Y− 10X2− 20Y2 + 20XY
Find the level of newspaper and magazine advertising that maximizes the firm’s sales.
Calculate the firm’s sales at the optimal values of newspaper and magazine advertising determined in part (a).
After an analysis of a large number of small businesses with two to nine employees, it was determined that, in a certain market sector, the operating costs C, in thousands of dollars, could be modeled by the function(pic#2)...., where p is the number of employees working for the firm. On the other hand, the realized revenue, R, of a firm could be determined as a function of the operating costs C, where R=(pic#1)... R and C are expressed in thousands of dollars.
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The demand function for Newton’s Donuts has been estimated as follows:Qx = -14 – 54Px + 45Py + 0.62Ax where Qx represents thousands of donuts; Px is the price per donut; Py is the average price per donut of other brands of donuts; and Ax represents thousands of dollars spent on advertising Newton’s Donuts. The current values of the independent variables are Ax=120, Px=0.95, and Py=0.64.Show all of your calculations and processes. Describe your answer for each question in complete sentences, whenever it is necessary.
Calculate the price elasticity of demand for Newton’s Donuts and describe what it means. Describe your answer and show your calculations.
Derive an expression for the inverse demand curve for Newton’s Donuts. Describe your answer and show your calculations.
If the cost of producing Newton’s Donuts is constant at $0.15 per donut, should they reduce the price and thereafter, sell more donuts (assuming profit maximization is the company’s goal)?
Should Newton’s Donuts spend…
Chapter B Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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