Author Question: You interview with an athletic footwear manufacturer that has annual advertising expenditures of 32 ... (Read 106 times)

LCritchfi · **on:** Jul 1, 2018

You interview with an athletic footwear manufacturer that has annual advertising expenditures of 32 million and total sales revenue of 100 million, and the firm selects the profit maximizing level of advertising expenditures.

If the advertising elasticity of demand is 0.4, then you know that Rule of Thumb for Advertising implies that the demand for the firm's products is: A) inelastic.
B) unit elastic.
C) elastic.
D) zero.

Question 2

If error in setting the policy is possible,

A) a standard generates smaller welfare losses than a fee when the MSC and MCA are both relatively flat.
B) a standard generates smaller welfare losses than a fee when the MSC and MCA are both relatively steep.
C) a standard generates smaller welfare losses than a fee when the MSC is relatively steep and the MCA is relatively flat.
D) a standard generates smaller welfare losses than a fee when the MSC is relatively flat and the MCA is relatively steep.
E) errors in standards and fees have equal welfare losses, so long as the errors are the same in percentage terms.