Solution Found!
Consider corporations that use advertising firms to develop marketing campaigns. Each corporation buys one campaign per year, and the cost per campaign is $120n , where n the number of corporations in the cluster (and campaigns per year). The cost of labor per firm is $30 n . A corporation’s profit equals its total revenue of $200 minus the sum of its marketing and labor costs. There are two location options: an isolated site (n 1) or a cluster with up to five corporations. a. Use a graph like Figure 3–2 to show the profit gap (profit in cluster ? profit in isolation) for one through five corporations. b. If initially all corporations are isolated and then one joins another to form a two-corporation cluster, other firms [will, won’t] have an incentive to join the cluster because…. c. In the long-run equilibrium, there will be a cluster of ____ corporations, each of which will earn a pro?t of ____ , differing from the pro?t of an isolated site by ____
Chapter 3, Problem 7(choose chapter or problem)
Advertising and Corporate Clusters
Consider corporations that use advertising firms to develop marketing campaigns. Each corporation buys one campaign per year, and the cost per campaign is $120n , where n the number of corporations in the cluster (and campaigns per year). The cost of labor per firm is $30 n . A corporation’s profit equals its total revenue of $200 minus the sum of its marketing and labor costs. There are two location options: an isolated site (n 1) or a cluster with up to five corporations.
a. Use a graph like Figure 3–2 to show the profit gap (profit in cluster ? profit in isolation) for one through five corporations.
b. If initially all corporations are isolated and then one joins another to form a two-corporation cluster, other firms [will, won’t] have an incentive to join the cluster because….
c. In the long-run equilibrium, there will be a cluster of ____ corporations, each of which will earn a pro?t of ____ , differing from the pro?t of an isolated site by ____.
Questions & Answers
QUESTION:
Advertising and Corporate Clusters
Consider corporations that use advertising firms to develop marketing campaigns. Each corporation buys one campaign per year, and the cost per campaign is $120n , where n the number of corporations in the cluster (and campaigns per year). The cost of labor per firm is $30 n . A corporation’s profit equals its total revenue of $200 minus the sum of its marketing and labor costs. There are two location options: an isolated site (n 1) or a cluster with up to five corporations.
a. Use a graph like Figure 3–2 to show the profit gap (profit in cluster ? profit in isolation) for one through five corporations.
b. If initially all corporations are isolated and then one joins another to form a two-corporation cluster, other firms [will, won’t] have an incentive to join the cluster because….
c. In the long-run equilibrium, there will be a cluster of ____ corporations, each of which will earn a pro?t of ____ , differing from the pro?t of an isolated site by ____.
ANSWER:Step 1 of 4
Given data:
Consider corporations that use advertising firms to develop marketing campaigns. Each corporation buys one campaign per year, and the cost per campaign is $120n, where n is the number of corporations in the cluster (and campaigns per year). The cost of labor per firm is $30 n. A corporation’s profit equals its total revenue of $200 minus the sum of its marketing and labor costs. There are two location options: an isolated site (n = 1) or a cluster with up to five corporations.