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Question 2. The effect of advertising is typically to move the demand curve to the right. Assume that, regardless of price, to gain an additional
Question 2. The effect of advertising is typically to move the demand curve to the right. Assume that, regardless of price, to gain an additional 11 customers a company must spend A 2 (0.02.5)"02 dollars on advertising. The demand curve from Question 1 then becomes q 2 (1000 +n) 200g 50). Let N 2 R A be the net value of revenue less advertising, where R is the revenue, and A 2 (0.025)n2 is the amount spent on advertising. (a) Write N as a function ofp and n and verify that p 2 100, n 2 1000 is a critical point for this function. (To simplify the notation, you may use the variables :1: 2 p and y 2 n to write N = f(:r:, y).) (b) Use a second derivative test to classify this critical point as a local max, local min, or neither
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