a). The below calculation indicated on the both parameter of short run and life time profit ,option 3 is one of the most suitable for advertisement of the company, calculated below.

Costs	Opt. 1 Mon. Online Magazine	Opt.2 Affiliated Retail Store	Opt. 3 Search Engine
Variable	$0	$0.25/click	$0.005/click
Total variable cost		1445	420
Fixed	$500	$50	Auction
Total Cost	$500	$1,495	$420
Outcomes
Expected Clicks	1,550	5,780	84000
Average Pg. views	20	5	1.5
% of Clicks Converted	7%	3%	0.14%
Profit
Short term($3.5/client)	$379.75	$606.90	$411.60
Long Term ($25/client)	$2,712.50	$4,335.00	$2,940.00
Profit / Total cost
Short term	0.7595	0.405953177	0.98
Long term	5.425	2.899665552	7

b). To determine the benefits of an advertising campaign, should Hula Island use the profit on the first sale or the expected lifetime profits? Why?

c). To choose between advertising campaigns, should Hula Island use the total expected profits or the ratio of total expected profits to advertising costs? Why?

2. Using your answer from Question 1 (either short-run or lifetime, total expected profits, or the ratio of total expected profits to advertising costs), determine the winner of the comparison between Options 1 and 2. Advertising Option 3 is different from the other two options in that the auction determines the fixed advertising cost. Assume Hula wins the search engine auction with a bid of $105. Which advertising option (1, 2, or 3) would you recommend to management?