Perfect Shots is company specializing in wedding photos and they have afixed advertising budget. Perfect Shots advertises on the radio and the television and it costs $5,000 per unit of radio advertising and $15,000 per unit of television advertising. At their current advertising levels, the marginal benefit from radio advertising is $4,800 and the marginal benefit from television advertising is $15,250. To optimally allocate their advertising budget, Perfect Shots should________ .

Question

Quizplus · Accepted Answer

To optimize their advertising budget, Perfect Shots should allocate their spending in a way that maximizes the marginal benefit per dollar spent. Since the marginal benefit per unit of television advertising is higher than that of radio advertising, it would be more efficient for them to decrease their spending on radio advertising and increase their spending on television advertising. Therefore, they should decrease the amount of advertising on the radio and increase the amount of advertising on television.

Perfect Shots Is Company Specializing in Wedding Photos and They