Economics for Managers

S * = ________c. Suppose the advertising budget is cut so that only $4,800 can be spent onadvertising. Now what are the sales-maximizing values of A, R, and S ?A * = ________R * = ________S * = ________d. Based on parts b and c, what is the effect of changing the advertising budgetconstraint on the optimal level of sales?ΔS *ΔB = ________,where ΔB is the change in the advertising budget. Do you expect thisnumber to be positive or negative?3. A life-insurance salesman spends 9 hours a week on the telephone soliciting newclients. From past experience, the salesman estimates that each hour spent callingstudents, blue-collar workers, and professionals will produce the following numberof additional sales:HoursCallingStudentsNumber of Additional SalesBlue-CollarWorkersProfessionals1 10 8 142 8 6 113 6 4 84 4 3 65 1 1 46 0 0 1a. How should the life-insurance salesman allocate his phone-calling time tomaximize the number of sales?Hours spent calling students = ______Hours spent calling blue-collar workers = ______Hours spent calling professionals = ______b. Now suppose the salesman decides to spend 16 hours a week soliciting newclients. How should he allocate his time?Hours spent calling students = ______Hours spent calling blue-collar workers = ______Hours spent calling professionals = ______Chapter 3: Marginal Analysis for Optimal Decisions64