Franco's Frozen Ice produces Italian flavored ice that is sold in the freezer section of grocery stores. Currently, Franco's does not have a fixed advertising budget and advertises in grocery stores' weekly advertising flyers and on the radio. A unit of advertising in the weekly flyers costs $1,500 and a unit of advertising on the radio costs $5,500. At their current advertising levels, the
marginal benefit of advertising in the flyer is $1,750 and the marginal benefit of advertising on the radio is $5,000. Which of the following is true?
A) To maximize profits, Franco's should increase the amount of advertising in flyers and decrease the amount of radio advertising.
B) To maximize profits, Franco's should decrease the amount of advertising in flyers and increase the amount of radio advertising.
C) To maximize profits Franco's should increase both the amount of advertising in flyers and the amount of radio advertising.
D) Franco's is currently maximizing its profits from advertising.
A) To maximize profits, Franco's should increase the amount of advertising in flyers and decrease the amount of radio advertising.
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