Using the Lagrangian Multiplier Technique,you Allocate Your $1,000,000 Advertising Budget

question 53

Multiple Choice

Using the Lagrangian multiplier technique,you allocate your $1,000,000 advertising budget between four media markets so as to maximize your profits.Your assistant informs you that the Lagrangian multiplier is equal to -$0.50.From this you conclude that:

• A) you are allocating your budget across markets optimally.
• B) advertising is worthless.
• C) another dollar of advertising would increase profits $0.50.
• D) another dollar of advertising would decrease profits $0.50.
• E) you could earn more profit with a larger advertising budget.

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Definitions:

Journalizing

The process of recording business transactions in the journal of accounting as part of the double-entry bookkeeping system.

Simple Entry

A journal entry that involves only two accounts.

Chart of Accounts

An organized list of all the accounts in a company’s general ledger used for recording financial transactions.

Asset Accounts

Accounts on the balance sheet representing valuable resources owned by the company expected to provide future benefits.