Show step by step how you obtained your final result in order to obtain all the points.Also,explain the economic meaning of the results obtained.

Exercises

1.The First National Bank received 3,000 inquiries following the latest advertisement describing its 30-month IRA accounts in theBoston World, a local newspaper.The most recent ad in a similar advertising campaign inMassachusetts Business, a regional business magazine, generated 1,000 inquiries.Each newspaper ad costs $500, whereas each magazine ad costs $125.

a.Assuming that additional ads would generate similar response rates, is the bank running an optimal mix of newspaper and magazine ads?Why or why not?

b. Holding all else equal, how many inquiries must a newspaper ad attract for the current advertising mix to be optimal.

2.The Route 66 Truck Stop, Inc., sells gasoline to both self-service and full-service customers.Those who pump their own gas benefit from the lower self-service price of $1.80 per gallon.Full-service customers enjoy the service of an attendant, but they pay a higher price of $1.90 per gallon.The company has observed the following relation between the number of attendants employed per day and full-service output:

Route 66 Truck Stop, Inc.

Number of Attendants per Day / Full-Service Output (gallons)

0 / 0

1 / 2,000

2 / 3,800

3 / 5,400

4 / 6,800

5 / 8,000

a.Construct a table showing the net marginal revenue product derived from attendant employment.

b.How many attendants would Route 66 employ at a daily wage rate of $160 (including wages and benefits)?

c.What is the highest daily wage rate Route 66 would pay to hire four (4) attendants per day?