Last month you assumed the position of manager for a large car dealership. The distinguishing feature of this dealership is its "no hassle" pricing strategy; prices (usually well below the sticker price) are posted on the windows, and your sales staff has a reputation for not negotiating with customers. Last year, your company spent $4 million on advertisements to inform customers about its "no hassle" policy, and had overall sales revenue of $30 million. A recent study from an agency on Madison Avenue indicates that, for each 3 percent increase in TV advertising expenditures, a car dealer can expect to sell 8 percent more carsbut that it would take a 3 percent decrease in price to generate the same 8 percent increase in units sold.

Assuming the information from Madison Avenue is correct, should you increase or decrease your firm's level of advertising?

multiple choice

• The firm should increase advertising
• The firm should not change advertising
• The firm should decrease advertising