Two Stores Are Located Side by Side and Attract Customers

question 12

Multiple Choice

Two stores are located side by side and attract customers to each other and to themselves by advertising. Where x₁ and x₂ are the advertising expenditures of stores 1 and 2, the profits of the firms are (48 + x₂) x₁ - 2(x₁) ² for store 1 and (54 + x₁) x₂ - 2(x₂) ² for store 2. Knowing these functions, one investor buys both stores. In order to maximize his total profits, how much should he spend on advertising for store 1?

• A) $10
• B) $26
• C) $25
• D) $35
• E) None of the above.

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Definitions:

Beginning Inventory

The financial value of stock ready for market at the beginning of a bookkeeping period.

Average Inventory

An estimation of the value of inventory over a certain time period, typically calculated by averaging the inventory levels at the beginning and end of the period.

Ending Inventory

The cumulative value of goods prepared for sale by the end of a bookkeeping period.

Beginning Inventory

The value of all the goods available for sale by a company at the start of an accounting period.