Question

You are an executive for Cola Corp. You have been tasked with determining the size (number of ad showings) of Cola Corp’s new advertising campaign. The marketing firm you are working with will create the advertisements in exchange for $800,000 compensation. The advertisements will be shown on local television media. Your marketing experts have told you that the ad campaign will increase the profitability of the local Cola Corp vendors but each time an advertisement will be shown Cola Corp must pay the local television station.
In words, describe:
a. Is this a maximization problem or a minimization problem?
b. What is your choice variable in this scenario?
c. The total benefits of this advertising campaign.
d. The total costs of this advertising campaign.

Answer 1

a)

Maximization problem

We need to maximize sales with respect to the level of advertisement

b)

Choice variable: Level of advertisement

c)

Total benefits: Increased sales post advertising

d)

Total cost: Total cost of the advertising campaign