Answer:
a) To find the expected value per ad that is viewed, we need to multiply the probability of a person buying the product by the profit made from each sale.
Given:
Cost of each ad shown = $0.10
Price of the product = $18.25
Probability of a person buying the product = 1/270
Profit made from each sale = Price of the product - Cost of the ad
Profit made from each sale = $18.25 - $0.10 = $18.15
Expected value per ad viewed = Probability of a person buying the product * Profit made from each sale
Expected value per ad viewed = (1/270) * $18.15
b) To determine if the ads are a good purchase, we need to calculate the expected value for the number of ads placed within the given budget.
Given:
Number of ads to be placed = 25,000
Expected value for the number of ads placed = Expected value per ad viewed * Number of ads placed
Expected value for the number of ads placed = (1/270) * $18.15 * 25,000
c) If you could afford only 500 ads, we would need to recalculate the expected value for the new number of ads.
Given:
Number of ads to be placed = 500
Expected value for the new number of ads placed = Expected value per ad viewed * Number of ads placed
Expected value for the new number of ads placed = (1/270) * $18.15 * 500
To determine if the ads are a good purchase, compare the expected values from parts b and c to the cost of placing the ads. If the expected value is higher than the cost, the ads are likely to be a good purchase.
Note: Since the specific costs and budget are not provided in the question, we cannot provide a definitive answer as to whether the ads are a good purchase. However, by comparing the expected values to the costs, you can make an informed decision based on your specific circumstances.