Question #808

C and E

Started by AndrewArabie · started 2023-09-02 17:27 · last activity 2023-09-04 01:56 · 2 replies

I understand C isn't correct because we don't know how advertising time will influence profits. However, it would be reasonable to assume the longer commercials are more effective, but by the same token, we also don't know how people increasing their television watching time influences advertisers profits yet it would be reasonable to assume that watching more television is beneficial to advertisers. What is the difference between C and E that makes C wrong and E right?

Replies

  1. AndrewArabie · 2023-09-02 17:31

    Never mind. The conclusion is not that the advertisers would continue to profit, rather it's that ad space would be no harder to sell. If the small time blocks are no longer available, and prices increase, then that would weaken the argument.

  2. Emil-Kunkin · 2023-09-04 01:56

    Good catch! I actually initially missed E because I did the math wrong. E means that the "value" of ads goes up about 12.5 percent, which is well within the range of the price increase.

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