AT&T charges $100 for every connection and sells 10 million connections in a year. They spent...
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AT&T charges $100 for every connection and sells 10 million connections in a year. They spent $10 million on advertising that year. They reduced prices and started charging $90 for every connection and sold 15 million connections next year. They spent $12 million on advertising that year. 1. What is the profit for each year? 2. What is the elasticity of price? 3. What is the elasticity of advertising? 4. Are consumers more responsive to advertising or price reductions? Specifically, should they increase advertising or plan on reducing prices? AT&T charges $100 for every connection and sells 10 million connections in a year. They spent $10 million on advertising that year. They reduced prices and started charging $90 for every connection and sold 15 million connections next year. They spent $12 million on advertising that year. 1. What is the profit for each year? 2. What is the elasticity of price? 3. What is the elasticity of advertising? 4. Are consumers more responsive to advertising or price reductions? Specifically, should they increase advertising or plan on reducing prices?
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Answer rating: 100% (QA)
To calculate the profit for each year we can use the formula Profit Revenue Cost 1 Profit for the first year Number of connections sold 10 million Pri... View the full answer
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Managing Business Ethics Making Ethical Decisions
ISBN: 9781506388595
1st Edition
Authors: Alfred A. Marcus, Timothy J. Hargrave
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