Answer to Question #240898 in Microeconomics for sophia

Question

Suppose ABC Corp. spends ​$200,000 per year on some basic level of​ advertising, regardless of its revenues. In​ addition, the company spends 35 percent of each dollar of revenue on extra advertising. Write a mathematical equation that describes the functional relation between advertising​ (A) and revenue​ (R).

A=

(Enter your response as an​ expression.)

Answer 1

As we can see that a ABC Corp. spends $200000 on basic advertising, regardless of it's revenues. Hence this cost is fixed type of cost because it is fixed, it have to be done regarless of anything.

Now on 1 dollar of revenue, 35 percent went to advertising. So this is a variable cost, as it depends on revenue.

Hence,

A = 200000+ 0.35 R, will be a mathematical equation, Where A is advertising and R is Revenue.