Suppose You Own a Business and Your Own Price Elasticity

question 1

Multiple Choice

Suppose you own a business and your own price elasticity is -2. In addition, suppose your advertising elasticity of demand is 0.50. If your marginal cost per unit is $4, what is your optimal advertising-to-sales ratio?

• A)0.25
• B)0.375
• C)0.625
• D)1.25

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Definitions:

Higher Temperature

A condition of increased heat in a given environment or system, often affecting physical states, chemical reactions, and biological processes.

Kilocalories

A unit of energy commonly used to measure the energy content of food, equal to 1,000 calories.

Kinetic Energy

Energy of motion. Compare with potential energy.

Legs

Limbs on animals and humans used primarily for supporting the body and facilitating locomotion or movement.