Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You are a manager at a large soft drick firm like PepsiCo. Each year you sell 6,000,000,000 servings of Mountain Delight at the price

image text in transcribed

You are a manager at a large soft drick firm like PepsiCo. Each year you sell 6,000,000,000 servings of Mountain Delight at the price of $0 99 The long-run average gross cost of a serving is constant and is equal to $0.40 per serving You are thinking of running an additional 30-second advertisement or an addtonal 60-second advertisement during the Super Bowl You determine that running the 30-second advertisement will raise the price consumers are willing to pay for the inbat 6,000,000,000 servings by $0 001 (1/10 of a cent) per serving You also determine that the advertisement will allow you to sell 500.000 more servings at a new price of 50 50 per serving. The price of a 30 second Super Bowl commercial is $5,000,000 Should you buy the advertisement? Why or why not? OA. Yes, you should buy the advertisement. The marginal benefit from running the advertisement is greater than the marginal cost So, your tiem will earn more prot OB. No, you should not buy the advertisement. There is no change in the additional gross profit from running the advertisement. So, your him will not earn more prot OC. No, you should not buy the advertisement. The marginal benest from running the advertisement is lower than the marginal cost. So, your fem wit not eam more profit OD. Yes, you should buy the advertisement. The marginal benefit from running the advertisement is equal to the marginal cost. So, your firm will eam more prott You determine that running the 60-second advertisement will rase the price consumers are willing to pay for the initial 6,000,000,000 servings by $0 0005 per serving. You also determine that the advertisement will allow you to sell 1,000,000 more servings at a price of $0.5035 per serving. The pace of a 60-second Super Bowl commercial is $10,000,000 Should you buy the advertisement? Why or why not? A. No, you should not buy the advertisement. The marginal benefit from running the advertisement is lower than the marginal cost. So your firm will not earn more pront OB. Yes, you should buy the advertisement. The marginal benefit from running the advertisement is greater than the marginal cost So, your fem will earn more prot OC. No, you should not buy the advertisement. There is no change in the additional gross profit from nurving the advertisement So, your firm will not earn more profit. OD. Yes, you should buy the advertisement. The marginal benest brom running the advertisement is equal to the marginal cost So, your firm will earn more profe

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Accounting An Introduction to Concepts Methods and Uses

Authors: Michael W. Maher, Clyde P. Stickney, Roman L. Weil

10th Edition

1111822239, 324639767, 9781111822231, 978-0324639766

More Books

Students also viewed these Accounting questions