The owner of a local retail firm wants to maximize the effectiveness of his weekly advertising....

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The owner of a local retail firm wants to maximize the effectiveness of his weekly advertising. He has a budget of $2,000 that can be spent on TV ads (costing $400 each) or radio ads (costing $300 each). In the table below, sales resulting from TV ads are shown in column 2 and sales resulting from radio ads are shown in column 3. The owner's goal is to maximize utility, which depends on the firm's total sales: U = U(sales from TV ads + sales from radio ads). Advertisement Number 1 2 3 4 5 6 Sales Resulting From TV Ads 4,000 7,000 9,800 12,400 14,800 16,800 Sales Resulting From Radio Ads 3,600 6,300 8,700 10,950 12,450 13,650 a. What do these numbers tell you about the effectiveness of incremental ads? Is this a reasonable assumption? Explain. b. Find the utility-maximizing advertising mix (the number of each type of ad). Illustrate the optimal bundle graphically. d. Speculate about the impact of a rise in the price of TV advertising on the utility-maximizing choice. Illustrate graphically. The owner of a local retail firm wants to maximize the effectiveness of his weekly advertising. He has a budget of $2,000 that can be spent on TV ads (costing $400 each) or radio ads (costing $300 each). In the table below, sales resulting from TV ads are shown in column 2 and sales resulting from radio ads are shown in column 3. The owner's goal is to maximize utility, which depends on the firm's total sales: U = U(sales from TV ads + sales from radio ads). Advertisement Number 1 2 3 4 5 6 Sales Resulting From TV Ads 4,000 7,000 9,800 12,400 14,800 16,800 Sales Resulting From Radio Ads 3,600 6,300 8,700 10,950 12,450 13,650 a. What do these numbers tell you about the effectiveness of incremental ads? Is this a reasonable assumption? Explain. b. Find the utility-maximizing advertising mix (the number of each type of ad). Illustrate the optimal bundle graphically. d. Speculate about the impact of a rise in the price of TV advertising on the utility-maximizing choice. Illustrate graphically.