b. Advertising would have to increase by $60,000 in order for the firm to regain the loss of 300
units resulting from its competitor’s reduction in price of $100. Without cost data, it is not possible to determine whether it would be worthwhile for the firm to increase advertising to offset the competitor’s move. However, one thing that this firm would probably want is to avoid is a price war.
c. The price of substitute products such as cruise packages.
d. If time series data were collected on a quarterly basis, then seasonal factors such as summer or winter could be introduced in the form of dummy variables.