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q14611985
Question:
Consider corporations that use advertising firms to develop marketing campaigns. Each
corporation buys one campaign per year, and the cost per campaign is $120/n
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 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 or won?t) have an incentive to join the cluster because .
C) long run equilibrium there will be a cluster of four corporation, each of which will
ANS-
Context header: Marketing
Context explanation: Marketing is the activity related to exchange of money and goods.
Marketing perform or happened at any palace whether physical or virtual place like place of
any geographical market or through online respectively. Therefore, the important thing is for
marketing two parties are involved buyer and seller.
Answer and explanation:
Firm uses advertising campaign for marketing.
$120
Cost of campaign is N
N is the number of corporation
| Number of firm | advertisement cost | labor cost of firm | total cost | firm total sale | profit |
profit difference |
|1|120|30|200|50|0|
|2|60|60|200|80|30|
|3|40|90|200|70|20|
|4|30|120|200|50|0|
|5|24|150|200|26|-24|
|6|20|180|200|0|-50|
A.
The profit gap is shown in 4 th column of the table, rising from $0 from one firm to $30, and
then dropping to 0 for a four-firm cluster.
B.
If initially all corporation are isolated and then one joins another to form a two corporation
cluster, other firms will or won’t have an incentive to join the cluster because the second firm
earns $30 more in profit.
C.
In the long run equilibrium there will be a cluster of four corporation, each of which will earn
a profit of $50 differing the profit of an isolated by 0.