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The cost of advertising is already considered in production, such as when calculating MC=MB. A good example of a familiar product is beer, which has 2 major costs: water and advertising. I'll note that the marginal product of advertising doesn't always have to be in the region with diminishing returns (perhaps when breaking into a market?) but it's not a bad ...


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Advertising is hard to understand if you take classroom economics models too literally. I highly recommend diving into the literature on behavioural economics if you are truly interested. But for the purposes of your question, Pepsi runs advertising because it operates in a market in which consumer choice is primarily driven by two sources of cognitive bias:...


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Given how the problem is set up, I think they want you to take A as given when you choose price. If that is the case, then you can find the comparative static $\partial P / \partial A$ We can think of p in the Foc as being a function of all the other parameters: $A\alpha-2A\beta P(A,\alpha,\beta,c)-A\beta c=0$ Now differentiate this wrt A: $\alpha-2\beta ...


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The first thing we must ask is about which part of advertising are we speaking? Are we talking about advertising on television and other entertainment mediums or are we talking about advertisement via the packaging of the good itself? One impact either way would be an increase in competition amongst monopolistically competitive firms. These firms are often ...


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