The Wilson Company's marketing manager has determined that the price elasticity of demand for its product equals - 2.2. According to studies she carried out, the relationship between the amount spent by the firm on advertising and its sales is as follows:

a. If the Wilson Company spends $200,000 on advertising, what is the marginal revenue from an extra dollar of advertising?
b. Is $200,000 the optimal amount for the firm to spend on advertising?
c. If $200,000 is not the optimal amount, would you recommend that the firm spend more or less on advertising?

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Advertising Expenditure $100,000 200,000 300,000 400,000 Sales $1.0 million 1.3 million 1.5 million 1.6 million