Using the Lagrangian multiplier technique,you allocate your $1,000,000 advertising budget between four media markets so as to maximize your profits.Your assistant informs you that the Lagrangian multiplier is equal to -$0.50.From this you conclude that:
A) you are allocating your budget across markets optimally.
B) advertising is worthless.
C) another dollar of advertising would increase profits $0.50.
D) another dollar of advertising would decrease profits $0.50.
E) you could earn more profit with a larger advertising budget.

Question

Quizplus · Accepted Answer

The Lagrangian multiplier indicates the rate of change of the objective function (profits) with respect to a change in the constraint (budget). A negative value of -$0.50 suggests that increasing the budget by one dollar would decrease profits by $0.50.

Using the Lagrangian Multiplier Technique,you Allocate Your $1,000,000 Advertising Budget