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Choice of increasing advertising expense

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Managers regularly face the choice of increasing advertising expense or reducing price to increase sales in the Oligopoly market structure. Suppose you have the following information. Current product price equal $24.00, Current sales level equal 30,000 units, The advertising department expects the next $20,000 in ad spend should increase sales by 1,000 units to 31,000 while maintaining the current price of $24.00., The finance department predicts dropping the price by $20,00 will increase sales by 3,000 to 33,000 units next year. Which action should you take next year (increase advertising or drop price)? Show your work and explain your answer. Explain the basic difference in each choice with respect to the theory of consumer demand (the demand curve).

Reference no: EM131395410

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