1. The Cost of Celebrities. Consider a firm that hires an expensive celebrity to advertise its products. Does the firm have an incentive to prevent its customers from discovering how much it pays the...

1. The Cost of Celebrities. Consider a firm that hires an expensive celebrity to advertise its products. Does the firm have an incentive to prevent its customers from discovering how much it pays the celebrity?

2. Word-of-Mouth Book Sales. Consider a publisher who earns a profit of $2 per book sold. An advertisement that costs $320,000 would sell 100,000 books directly. To make the advertisement worthwhile, how many of the original buyers must each persuade just one other person to buy the book?