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 $14,000 per unit of television advertising. At their current advertising levels, the marginal benefit from radio advertising is $5,000 and the marginal benefit from television advertising is $14,000. Which of the following is true?
A) To optimally allocate their advertising budget, Perfect Shots should decrease the amount of advertising in radio and television.
B) Perfect shots has optimally allocated their advertising budget, which guarantees they have maximized their profits.
C) To optimally allocate their advertising budget, Perfect Shots should increase the amount of advertising in radio and television.
D) Perfect shots has optimally allocated their advertising budget, but that does not guarantee that they have maximized their profits.
Correct Answer:
Verified
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