Determine the optimal number of ads -regression, Microeconomics

Assignment Help:

You work in the front office of the Spokane Indians, a minor league baseball team that plays in the Northwest League of Minor League Baseball. Your boss wants to know the different costs associated with different levels of advertising, including the average and the marginal costs. Each ticket to the game is $10. One of the junior economists in your office has run some regressions and found that demand for the Indians is:

Q = 200 + 120A - 10A^2

Where Q is the nightly attendance and A is the amount of advertising units they can purchase. The boss says he will never budge on price, so you have to make use of advertising. Luckily, the advertising agency you contacted will work with you on the price, if you buy enough ad spots. They gave you the following equation to estimate the cost of the ads based on the number you bought:

CA = 500 + 220A - 2A^2

1. Fill in the table on the next page, it might help you answer the questions that follow.

2. If the ads didn't cost anything, how much would be the optimal selection? What's the optimal number of ads now that you consider the cost structure above?

3. What if the ads really cost MORE whenever you purchased more ads? (Imagine the costs of switching from billboards to tv commercials). How does your answer change when the total costs of ads are CA = 500 + 220A + 2A^2 ? Compare your answer with the previous one. Is the original experiencing diminishing returns or is this new one?

4. Would you consider advertising a short-run or long-run input? Is it variable or fixed? Why?

5. Give an example of a short-run variable cost, a short-run fixed cost, a long-run variable cost, and a long-run fixed cost.

6. Describe the two types of different contract options that leagues as a whole can decide from. Give examples of current leagues that use each type of tv contracts.

Ads Bought

Attendance

TC of Ads

Mc of ads

AC of ads

Marg-product

MRP

 

1

310

718

-

718

-

-

 

2

400

932

214

466

90

900

 

3

470

1142

210

380.67

70

700

 

4

520

1348

206

337

50

500

 

5

550

1550

202

310

30

300

 

6

560

1748

198

291.33

10

291.33

 

7

550

1942

194

277.43

-10

277.43

 

8

520

2132

190

266.5

-30

266.5

 


Related Discussions:- Determine the optimal number of ads -regression

Indifference curves, why men and womens indifference curves are different

why men and womens indifference curves are different

Atoms and molecules, who proposed the law of chemical combinations?

who proposed the law of chemical combinations?

Demand, demand elasticity in urdu

demand elasticity in urdu

Explain the phrase price rationing means, Explain what the phrase “price ra...

Explain what the phrase “price rationing” means. Price rationing is the method by which the market system assigns goods and services to consumers while quantity demanded exceeds

Elasticity of demand , The Bushman Cinema is the only movie theatre locate...

The Bushman Cinema is the only movie theatre located in the medium-size country town of Sleepy Hollow.  The owner wants to charge an admission fee of $10 per seat and past experien

Property & contracts, Analyze the various ways in which property rights enc...

Analyze the various ways in which property rights encourage economic development and make at least one recommendation for improving current laws. Explain your rationale.

Cost push or supply inflation, Cost Push or Supply Inflation: It is a...

Cost Push or Supply Inflation: It is a situation where the process of increasing price level is caused by increasing costs of production which push up prices. Cost push infla

Explain about employment rate, Q. Explain about Employment Rate? Emplo...

Q. Explain about Employment Rate? Employment Rate: This measures share of working age adults who are in fact employed in a paying position. Employment rate can be a better in

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd