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Microeconomics - Last listed question on firm advertising spend The table below shows the relationship for a hypothetical firm between its advertising expenditures and the

Microeconomics - Last listed question on firm advertising spend

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The table below shows the relationship for a hypothetical firm between its advertising expenditures and the quantity of its output that it expects it can sell at a fixed price of $10 per unit. Advertising Expenditures (Millions) Quantity Sold At P = $10/In Million Units $1.00 6.00 $1.40 7.00 $1.80 7.40 $2.20 7.60 $2.60 7.70 In economic terms, why might the relationship between advertising and sales look the way it does? The marginal effect of advertising is decreasing due to diminishing marginal returns . Assume that the marginal cost of producing this product (not including the advertising costs) is a constant $9 per unit. How much advertising should this firm be doing? This firm should spend $ million on advertising. (Enter your response rounded to two decimal places.)

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