- 1Discuss the role of advertising in product differentiation and the intent of advertising in altering the firm’s demand curve
Discuss the role of advertising in product differentiation and the intent of advertising in altering the firm’s demand curve

- 2A firm with monoply power has the demand curve:P = 100 - 3Q + 4A^1/2And has the total cost function:C = 4Q^2 + 10Q + Awhere A is the level of advertising expenditures
A firm with monoply power has the demand curve:P = 100 - 3Q + 4A^1/2And has the total cost function:C = 4Q^2 + 10Q + Awhere A is the level of advertising expenditures. P is price, Q is output.How do I find the values of A, Q, and P that maximize the firm's profit?

- 3advertising in arecent uear, outdoor advertisements amounted to 2.2% of all advertising dollars spent in the u
advertising in arecent uear, outdoor advertisements amounted to 2.2% of all advertising dollars spent in the u.s. what fraction is this?

- 4How can you obtain a downward sloping market demand curve from a horizontal firm demand curve experiencing perfect competition
How can you obtain a downward sloping market demand curve from a horizontal firm demand curve experiencing perfect competition? If you sum up individual demand horizontally for the firm at the given market price will market demad not still be horizontal?

- 51)The director of marketing atVanguard Corporation believes thesales of the company’s Bright SideLaundry detergent (S) are related toVanguard’s own advertisingexpenditure (A), as well as thecombined advertising expendituresof i
1)The director of marketing atVanguard Corporation believes thesales of the company’s Bright SideLaundry detergent (S) are related toVanguard’s own advertisingexpenditure (A), as well as thecombined advertising expendituresof its three biggest rivaldetergents R). The marketingdirector collects 36 weeklyobservations on S, A, and R toestimate the following multipleregression equation:S = a + bA + cRWhere S, A, R are measured indollars per week. Vanguard’smarketing director is comfortableusing parameter estimates that arestatistically significant at the10 percent level or better.a) What sign does the marketingdirector expect a, b, and c to have?b) Interpret the coefficients a, b,and c?The regression output from thecomputer is as follows:Dependant Variable: SObservations: 36R-Square: 0.2247 F-Ratio: 4.781P-value on F: 0.0150Variable: InterceptParameter Est: 175086.0Standard Error: 63821.0T-Ratio: 2.74P-Value: 0.0098Variable: AParamter estimate: 0.8550Standard Error: 0.3250T-Ratio: 2.63P-Value: 0.0128Variable: RParameter Est: - 0.284Standard Err: 0.164T-ratio: - 1.73P-Value: 0.0927c) Does Vanguard’s advertisingexpenditure have a statisticalsignificant effect on the sales ofBright Side detergent? Explain,using appropriate p-value……d) Does the advertising by its threelargest rivals affect sales ofBright Side detergent in astatistical significant way?Explain using the appropriatep-value…….e) What fraction of the totalvariation in sales of Bright Sideremains unexplained?What can the marketing director doto increase the explanatory powerof the sales equation?What other explanatory variablesmight be added to this equation?f) What is the expected level of saleseach week when Vanguard spends$40,000 per week and the combinedadvertising expenditures for thethree rivals are $100,000 per week?

- 61)The director of marketing at Vanguard Corporation believes the sales of the company’s Bright Side Laundry detergent (S) are related to Vanguard’s own advertising expenditure (A), as well as the combined advertising expenditures
1)The director of marketing at Vanguard Corporation believes the sales of the company’s Bright Side Laundry detergent (S) are related to Vanguard’s own advertising expenditure (A), as well as the combined advertising expenditures of its three biggest rival detergents R). The marketing director collects 36 weekly observations on S, A, and R to estimate the following multiple regression equation: S = a + bA + cR Where S, A, R are measured in dollars per week. Vanguard’s marketing director is comfortable using parameter estimates that are statistically significant at the 10 percent level or better. a) What sign does the marketing director expect a, b, and c to have? b) Interpret the coefficients a, b, and c? The regression output from the computer is as follows: Dependant Variable: S Observations: 36 R-Square: 0.2247 F-Ratio: 4.781 P-value on F: 0.0150 Variable: Intercept Parameter Est: 175086.0 Standard Error: 63821.0 T-Ratio: 2.74 P-Value: 0.0098 Variable: A Paramter estimate: 0.8550 Standard Error: 0.3250 T-Ratio: 2.63 P-Value: 0.0128 Variable: R Parameter Est: - 0.284 Standard Err: 0.164 T-ratio: - 1.73 P-Value: 0.0927 c) Does Vanguard’s advertising expenditure have a statistical significant effect on the sales of Bright Side detergent? Explain, using appropriate p-value…… d) Does the advertising by its three largest rivals affect sales of Bright Side detergent in a statistical significant way? Explain using the appropriate p-value……. e) What fraction of the total variation in sales of Bright Side remains unexplained? What can the marketing director do to increase the explanatory power of the sales equation? What other explanatory variables might be added to this equation? f) What is the expected level of sales each week when Vanguard spends $40,000 per week and the combined advertising expenditures for the three rivals are $100,000 per week? Thanks, EY I find it interesting that the Vanguard director doesnt even consider price as a determinent of sales. Hummmm. While good economic reasoning should be a part of any econometric analyses, you are given what you are given. a) I would expect own advertising would have a positive effect and competitor advertising have a negitive effect. Because of some level of brand-loyality, I would expect the intercept term to be positive. b) ta da, the model meets my priors. c) I would answer: Significant at the 5% level, but not at the 1% level. d) what does the T-ratio (and accompaning P-value) tell you? e) what does the R^2 statistic tell you? In addition to adding Prices (own and competitors) to the equation, I would consider adding lag variable(s) on advertising expenses. I would also test some seasonal dummy variables (are more loads of laundry done in the summer vs winter?) f) Plug the values into your estimated equation. What do you get. Your suggestions were a trendous help, can I e-mail them to you to check? I need them back by Sunday at 6pm.

- 7Discuss they types of advertising media that you think are most appropriate for a restaurant that has a large population of foreign guests
Discuss they types of advertising media that you think are most appropriate for a restaurant that has a large population of foreign guests.

- 8A demand equation (sometimes called a demand curve) shows how much money people would pay for a product depending on how much of that product is available on the open market
A demand equation (sometimes called a demand curve) shows how much money people would pay for a product depending on how much of that product is available on the open market. Often, the demand equation is found empirically (through experiment, or market research). The demand equation for a certain type of printer is given by: D = - 200p + 35,000 The supply equation is predicted to be: S = - p2 + 400p - 20,000 (a). Does the graph of the supply equation open up or down? How did you determine this? (b). What is the point of the vertex of the supply equation? (c). How many solutions are there to the supply equation ? How do you know? (d). Find the equilibrium price (Hint: The equilibrium price is the price for which supply equals demand).

- 9The table shows the relationship for a hypothetical firm between its advertising expenditures and the quantity of its out-put that it expects it can sell at a fixed price of $5 per unit
The table shows the relationship for a hypothetical firm between its advertising expenditures and the quantity of its out-put that it expects it can sell at a fixed price of $5 per unit.

- 10The table shows the relationship for a hypothetical firm between its advertising expenditures and the quantity of its out-put that it expects it can sell at a fixed price of $5 per unit
The table shows the relationship for a hypothetical firm between its advertising expenditures and the quantity of its out-put that it expects it can sell at a fixed price of $5 per unit. Advertising Quantity Sold at P = $5/IN Expenditures (millions) Million Units $1 8 $1.2 9 $1.4 9.4 $1.6 9.6 $1.8 9.7a. In economic terms, why might the relationship between advertising and sales look the way it does?b. Assume that the marginal costs of producing this product (not including the advertising costs) are a constant $4. How much advertising should this firm be doing? What economic principle are you using to make this decision?

- 11What variables other than price and advertising are likely to affect the quantity demanded of a product
What variables other than price and advertising are likely to affect the quantity demanded of a product?

- 12A manager for a firm that sells advertising space in magazines and periodicals is considering a number of new initiatives to recognize high-performing members of her sales force
A manager for a firm that sells advertising space in magazines and periodicals is considering a number of new initiatives to recognize high-performing members of her sales force. Assume that the annual sales revenue for members of her sales force is normally distributed with a population mean of $800,000 and a population standard deviation of $100,000. One option is to recognize all salespeople with annual sales exceeding one million with a “Platinum Achiever” designation. What percentage of her salespeople would qualify for this designation? Answer .0228 .0562 .0728 .0913 .1015 .1123