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

Structural unemployment, Structural Unemployment: This is unemploymen...

Structural Unemployment: This is unemployment resulting from changes in the pattern of demand for goods and services or changes in technology.These changes may in turn alter

Integrability, explain about integrability problem

explain about integrability problem

Demand and supply, what happens when price is fix and there is a change of ...

what happens when price is fix and there is a change of the supply and demand curve

Economics, Assume that a persion lives for three equal periods: Youth, Earl...

Assume that a persion lives for three equal periods: Youth, Early Adulthood and Late Adulthood. The person dies after later adulthood period ends. If one invests $200 in educatio

Elasticity of demand for gasoline - environmental services, Answer in True ...

Answer in True or Flees 1.  "Revealed preference methods for valuing environmental services and goods (for example hedonic price method, travel cost model, etc.) can reveal non-

Demand and supply, draw the demand curve,when there is rise in the price of...

draw the demand curve,when there is rise in the price of a product on the demand of the product

Find the equilibrium price and quantity, 1. Assume that the market for whea...

1. Assume that the market for wheat is perfectly competitive. Suppose the demand curve for wheat is given by: QD = 200 – 2P where QD is the quantity demanded, in bushels, and P i

Estimating and predicting cost, Estimating and Predicting Cost * Estima...

Estimating and Predicting Cost * Estimates of future costs can be obtained from a cost function, which relates cost of production to level of output and other variables which t

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