Perfect Shots is company specializing in wedding photos and they have a fixed 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 $5,800 and the marginal benefit from television advertising is $14,250. To optimally allocate their advertising budget, Perfect Shots should________.

Question

Quizplus · Accepted Answer

To optimally allocate their advertising budget, Perfect Shots should allocate more funds to television advertising due to the higher marginal benefit. Therefore, they should decrease their spending on radio advertising and increase their spending on television advertising. Option B suggests doing just that by increasing the amount of advertising in radio and decreasing the amount of advertising in television.

Perfect Shots Is Company Specializing in Wedding Photos and They