When a concave downward function is present, increasing advertising expenditures result in:
A)greater sales.
B)diminishing returns.
C)average returns.
D)further advertising expenditures.

Question

Quizplus · Accepted Answer

When a concave downward function is present, it means that the relationship between advertising expenditures and sales is not linear. Initially, as advertising expenditures increase, there is a relatively large increase in sales. However, as spending continues to increase, the returns decline and eventually reach a point where additional spending does not yield much increase in sales. This point is known as the point of diminishing returns. Therefore, the best choice is B - increasing advertising expenditures result in diminishing returns.

When a Concave Downward Function Is Present, Increasing Advertising Expenditures