An Advertising Elasticity of 0

question 22

Multiple Choice

An advertising elasticity of 0.35 means that for every one percent change in advertising expenditures there will be an estimated ________ percent change in volume sold.

• A)0.0035
• B)0.035
• C)0.35
• D)3.5
• E)35

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Definitions:

Long-run Average Total Cost

The per-unit cost of production when all inputs, including those typically fixed, can be varied, showing economies of scale if downward sloping.

Economies of Scale

Cost advantages reaped by companies when production becomes efficient, as the average cost of production falls with increasing output.

Constant Returns to Scale

A situation in production where increasing the input of all resources by any proportion yields an increase in output by the same proportion.

Long-run Average Total Cost

The per unit cost of production when all inputs, including capital, are variable, assuming optimal efficiency.