ZuoTi.Pro
Question

Under the guidance of a good manager, a monopolistically competitive firm spends an optimal amount of its revenues on ad...

Under the guidance of a good manager, a monopolistically competitive firm spends an optimal amount of its revenues on advertising. Last month the firm spent $2,000 of its $10,000 revenues on advertising. If its advertising elasticity was 0.5, what was this firm’s price elasticity demand? Does this make the firm’s demand elastic, unit elastic or inelastic?

business   economics   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Advertising expenditure / Revenue = - Advertising elasticity / price elasticity

2000 / 10000 = - 0.5 / price elasticity

price elasticity = -0.5 / 0.2 = -2.5

As it is negative, hence demand is inelastic

0 0
Add a comment
Know the answer?
Add Answer to:
Under the guidance of a good manager, a monopolistically competitive firm spends an optimal amount of its revenues on ad...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • 2. 5 pts. Under the guidance of a good manager, a monopolistically competitive firm spends an...

    2. 5 pts. Under the guidance of a good manager, a monopolistically competitive firm spends an optimal amount of its revenues on advertising. Last month the firm spent $2,000 of its $10,000 revenues on advertising. If its advertising elasticity was 0.5, what was this firm's price elasticity demand? Does this make the firm's demand elastic, unit elastic or inelastic?

  • (1)Product differentiation makes the demand for a monopolistically competitive firm’s product A perfectly elastic. B more...

    (1)Product differentiation makes the demand for a monopolistically competitive firm’s product A perfectly elastic. B more elastic than in a competitive market. C perfectly inelastic. D less elastic than that of a monopoly. E less elastic than in a competitive market. 2. Successful advertising under monopolistic competition might A help consumers understand why products in the industry are homogeneous. B reduce the price elasticity of demand for that firm’s output. C create a high barrier to entry. D make the...

  • How does a monopolist or monopolistically competitive firm determine graphically if the demand for its product...

    How does a monopolist or monopolistically competitive firm determine graphically if the demand for its product is elastic, unit elastic or inelastic? Why does it not want to operate where demand is inelastic

  • Score: 0 of 1 pt Concept: Advertising 2 Why would a monopolistically competitive firm advertise? A...

    Score: 0 of 1 pt Concept: Advertising 2 Why would a monopolistically competitive firm advertise? A monopolistically competitive firm would advertise to A. make its demand curve more elastic. O B. decrease the price it charges O C. reduce the total cost of production. D. reduce product differentiation. E. shift its demand curve to the right Click to select your answer and then click Check Answer javascript:doExercise(8); ewI

  • QUESTION 23 When a good or service is a luxury, its price elasticity of demand tends...

    QUESTION 23 When a good or service is a luxury, its price elasticity of demand tends to be Elastic Inelastic Unit Elastic Unknown QUESTION 24 A decrease in the price of a product that a firm sells will cause the demand for it to increase. True False QUESTION 25 Economic profits are equal to total revenues minus Only implicit costs Only explicit costs Implicit and explicit costs Marginal cost QUESTION 26

  • please finish all questions have been informed that the price is less than 1. To increase total revenues, 9. You...

    please finish all questions have been informed that the price is less than 1. To increase total revenues, 9. You are the sales manager for a software company elasticity of demand for your most anular software is less than you should: A. Increase the price of the software B. Decrease the price of the software C. Hold the price of the software constant D. Increase the supply of the software 10. Which of the following factors will make the demand...

  • 1. Under the perfectly competitive market structure, the demand curve of an individual firm is    [ Select...

    1. Under the perfectly competitive market structure, the demand curve of an individual firm is    [ Select ]    ["downward sloping", "unit-elastic", "perfectly inelastic", "perfectly elastic"]       meaning that the demand curve is also the [ Select ]   ["Marginal Cost curve", "average cost", "marginal revenue = Marginal costs", "marginal revenue curve"]       2. With a perfectly competitive firm the supply curve is: a) Marginal Product b) the marginal cost curve above the Average fixed Cost curve c) it has...

  • A monopolistically competitive firm that wishes to maximize profits will choose to produce that level of output...

    A monopolistically competitive firm that wishes to maximize profits will choose to produce that level of output where: Price of the good is equal to the marginal revenue of producing the last unit of the good Price of the good is equal to the marginal cost of producing the last unit of the good. Marginal revenue is equal to marginal cost. ATC is at the lowest point possible. An industry has eight firms with the following market shares: 5%, 20%,...

  • 1. Which of the following is not an example of a capital resource? the expertise of...

    1. Which of the following is not an example of a capital resource? the expertise of a computer programmer a pitch fork a commercial sewing machine 100 acres of farmland in central California Consider the market for argyle socks. Suppose there is an unsuccessful ad campaign (staring Pee Wee Herman) that decreases the popularity of wearing argyle socks significantly. What effect will the decrease in popularity have on the equilibrium price and quantity of argyle socks, ceteris paribus? Price and...

  • A startup firm in a perfectly competitive market finds that its average total cost is higher...

    A startup firm in a perfectly competitive market finds that its average total cost is higher than the market price. Since the firm is incurring​ short-run losses, the management is debating whether to continue operations. Alex​ Ferguson, a senior​ manager, feels that this is a temporary phase and the firm should continue operations. Which of the​ following, if​ true, would weaken​ Alex's argument? A. A few of the existing competitors have raised the prices of their products. B. The firm...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT