Qd = 2000 - 25 P + 2 A, where P represents price and A is the

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Qd = 2000 - 25 P + 2 A,

where P represents price and A is the number of weekly advertisements.

Presently the theater advertises 125 times per week. Assuming this is the only theater in town, and its marginal cost, MC, is equal to zero,

a. Determine the profit-maximizing ticket price for the theater.

b. What is the price elasticity of its demand at this price?

c. What is the elasticity of its demand with respect to advertising?

d. Now suppose the theater increases the number of its ads to 250. Should the theater increase its price following this ad campaign? Explain.

Related Book For answer-question

Intermediate Microeconomics

ISBN: 978-0393123968

9th edition

Authors: Hal R. Varian

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Posted Date: Feb 15, 2024 06:01 AM

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Qd = 2000 - 25 P + 2 A, where P represents price and A is the

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Theater Pricing and Advertising Analysis a ProfitMaximizing Ticket Price Since marginal cost MC is zero profit maximization occurs when marginal reven... View the full answer

Intermediate Microeconomics

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