Question

A retail company estimates that if it spends x thousands of dollars on advertising during the year, it will realize a profit of P ( x ) dollars, where P ( x ) = − 0.5 x 2 + 120 x + 2000 , where 0 ≤ x ≤ 187 . a . What is the company's marginal profit at the $ 100000 and $ 140000 advertising levels? P ' ( 100 ) = P ' ( 140 ) = b . What advertising expenditure would you recommend to this company? $

Answer 1

Answer:

Step-by-step explanation:

If the profit realized by the company is modelled by the equation

P (x) = −0.5x² + 120x + 2000, marginal profit occurs at dP/dx = 0

dP/dx = -x+120

P'(x) = -x+120

Company's marginal profit at the $100,000 advertising level will be expressed as;

P '(100) = -100+120

P'(100) = 20

Marginal profit at the $100,000 advertising level is $20,000

Company's marginal profit at the $140,000 advertising level will be expressed as;

P '(140) = -140+120

P'(140) = -20

Marginal profit at the $140,000 advertising level is $-20,000

Based on the marginal profit at both advertising level, I will recommend the advertising expenditure when profit between $0 and $119 is made. At any marginal profit from $120 and above, it is not advisable for the company to advertise because they will fall into a negative marginal profit which is invariably a loss.