The Table Above Shows the Current Costs for a Firm

question 86

Multiple Choice

The table above shows the current costs for a firm to advertising on the radio, television, and newspaper.
-Refer to the table above. If at the current advertising level, A = $10,000, B = $15,000, and C = $8,000, to maximize profit, which of the following should the firm do?

• A)The firm should decrease its advertising on the radio and increase its advertising in newspapers.
• B)The firm has optimally allocated their advertising budget, but that does not guarantee that they have maximized their profits.
• C)The firm has optimally allocated their advertising budget, which guarantees they have maximized their profits.
• D)The firm should decrease its advertising on the radio and increase its advertising on television.

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Definitions:

Mutually Exclusive Projects

Projects that, if accepted, preclude the acceptance of any other projects within the same category.

Managerial Decision

The process by which managers choose among alternative strategies or actions to solve organizational problems or to take advantage of opportunities.

NPV

Net Present Value, a method used in capital budgeting to determine the profitability of an investment or project by calculating the present value of expected cash flows versus initial cost.

Independent Projects

Investment opportunities that do not affect the cash flows or profitability of other projects considered by an entity.