2.4 You are the head of an industry trade association.

The table shows the marginal benefit from advertising for the four firms in the industry.

a. What is the industry-wide marginal benefit schedule from advertising?

b. Suppose that the price of an advertisement is $680. What is the profit-maximizing quantity of industry-wide advertisements?

c. What is the total cost of the profitmaximizing quantity of industry-wide advertisements?

d. What is a fair allocation of the cost of this advertising among the four firms? Explain your answer.

e. What problem do you face in trying to allocate the cost? Explain your answer.

Transcribed Image Text:

Quantity of Advertisements (units) Firm A Marginal Benefit Firm B Marginal Benefit Firm C Marginal Benefit 1 $200 $250 $300 Firm D Marginal Benefit $350 2 180 220 260 300 3 160 190 220 250 4 140 160 180 200 5 120 130 140 100