Two Stores Are Located Side by Side and Attract Customers

question 38

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:

Risk-Free Rate

The expected yield from an investment that carries no risk of losing money, often shown through the interest rates of government securities.

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