Due to operating cost already high, the firm Carlo & You Energy Drink Inc. (an oligopoly) seeks your advice on whether to advertise or not and provides you with the following information:
Advertising Non- Advertising
P Q TR MR P Q TR MR
22 3 22 0
21 4 21 1
20 5 20 1
18 5 18 2
15 8 15 3
14 9 14 4
13 10 13 5
a. Find the total revenue and marginal revenue in both situations.
b. With a $16 unit cost, what is the firm's profit maximizing production?
c. The radio advertisement costs $600 a month (30 days), find the firm's profit per case of energy drink (hint: consider daily advertisement cost)
d. Should the firm advertise or not? Explain your rationale.