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ID: 1233083 • Letter: #
Question
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Media Exp
Gross Sales w/News-papers
Marginal Revenue
Gross Sales w/Radio
Marginal Revenue
Gross Sales w/ Television
Marginal Revenue
0
10,000
10,000
10,000
100
12,000
2,000
14,000
4,000
13,000
3,000
200
13,800
1,800
17,600
3,600
15,600
2,600
300
15,400
1,600
20,200
2,600
18,000
2,400
400
16,600
1,200
22,000
1,800
18,600
600
500
17,200
600
22,400
400
18,800
200
Given a $500 advertising budget, gross sales and profit contribution are maximized by allocating $300 to radio and $200 to television advertising. Weather or not Glamour Designs wants to maximize revenues or profit, this expenditure allocation is optimal.
Why? How? is this true. What is missing to show the answer is true
<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /?>
Media Exp
Gross Sales w/News-papers
Marginal Revenue
Gross Sales w/Radio
Marginal Revenue
Gross Sales w/ Television
Marginal Revenue
0
10,000
10,000
10,000
100
12,000
2,000
14,000
4,000
13,000
3,000
200
13,800
1,800
17,600
3,600
15,600
2,600
300
15,400
1,600
20,200
2,600
18,000
2,400
400
16,600
1,200
22,000
1,800
18,600
600
500
17,200
600
22,400
400
18,800
200
Explanation / Answer
see, the aim is to get the max marginal revenue to maximize profit. also the sum total gross sales should be maximum, so we start with radio having max MR of 4000 gives 14000 units.(100$ used) then we see for second MR max in the other two, which is in television of 3000, sales 13000,(100$ used) rest of the money has to be spent in the 3rd remaining newspaper which is 300$ gives 15,400. ADD ALL now similarly take second best option first and re-do the calculation. You will see that you get max sales at $300 to radio and $200 to television and 0 to newspaper. this is how its done. ASk if u have any more doubts please rate appreciated
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