Reminder Round all answers to two decimal places unless otherwise indicated. . M
ID: 3147991 • Letter: R
Question
Reminder Round all answers to two decimal places unless otherwise indicated. . Marginal Profit from Advertising Let P(t) denote the profit made by a company when t dollars are invested in advertising. The marginal profit is a. Explain the meaning of in practical terms. b. If the marginal profit is positive, should you invest more or less money in advertising? Explain why you give the answer you do. c. If the marginal profit is negative, should you invest more or less money in advertising? Explain why you give the answer you do.Explanation / Answer
1. (a) Here dP/dt in practical terms means that dP/dt is the change in profit earned by the company over the change of dollars invested in advertising.
(b) If marginal profit is positive, that means if we investing more dollars in advertising that investment will earn more profit as dP/dt is rate of change of profit with respect to change in advertising spending. So, we should invest more money in advertising.
(c) If marginal profit is negative, that means if we investing more dollars in advertising that investment will earn negative profit as dP/dt is rate of change of profit with respect to change in advertising spending. So, we should invest less money in advertising in this case