If wilson company spends 200000 on advertising find the

Reference no: EM13390812

The Wilson Company's marketing manager has determined that the price elasticity of demand for its product equals -2.2. According to studies she carried out, the relationship between the amount spent by the firm on advertising and its sales is as follows:

Advertising Expenditure

Sales

$100,000

$1.0 million

$200,000

$1.3 million

$300,000

$1.5 million

$400,000

$1.6 million

a. If the Wilson Company spends $200,000 on advertising, what is the marginal revenue from an extra dollar of advertising?

b. Is $200,000 the optimal amount for the firm to spend on advertising?

c. If $200,000 is not the optimal amount, would you recommend that the firm spends more or less on advertising?

Reference no: EM13390812

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