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

How can decrease in demand, Movements of the demand curve itself, either to...

Movements of the demand curve itself, either to the left or right are known as changes in demand.  A change in demand is caused by a change in one or more of the nonprice determina

Representative consumer faces a wage income tax, suppose, as in the federal...

suppose, as in the federal income tax code for the united states, that the representative consumer faces a wage income tax with a standard deduction. That is the representative con

Monopoly, What are the causes of emergence of monopoly?

What are the causes of emergence of monopoly?

The analysis of competetive markets, how can a price ceiling make consumers...

how can a price ceiling make consumers better-off? under what conditions might it make them worse off?

Distributive bargaining, Distributive Bargaining An approach to negoti...

Distributive Bargaining An approach to negotiation that finds to divide up a fixed amount of resources.

What is debt burden, Q. What is Debt Burden? Debt Burden:Real economic ...

Q. What is Debt Burden? Debt Burden:Real economic importance of a debt relies on interest rate that should be paid on debt and on total income of consumer or business which und

What is the difference between gdp and gnp, What is the difference between ...

What is the difference between GDP and GNP?  Gross domestic product (GDP) is the value of the total final output formed inside a country, during a given year. GDP, like all mea

Elasticity, what are the uses of cross elasticity quantity in demand/

what are the uses of cross elasticity quantity in demand/

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