Calculate profit-maximizing price-advertising expenditure

Assignment Help Business Economics

Reference no: EM13976363

Suppose the demand for a new pharmaceutical drug, on which the manufacturer has a patent monopoly, is given by:

Q(P,A) = (100 – P) ·A^0.5

Where Q is output per period, P is the price, and A is the current period promotional expenditure.

Total production costs are given by C(Q) = 60Q.

Question: Calculate the profit-maximizing price, advertising expenditure, and profits for the firm.

Reference no: EM13976363

Questions Cloud

Suppose the market interest rate : Suppose the market interest rate is 10 percent. Would you be willing to lend $10,000 if you were guaranteed to receive $1,000 at the end of each of the next 12 years plus a $5,000 payment 15 years from now? Why or why not?

Describes effect shift to the right of labor demand curve : Consider a labor market in which the intersection of the demand curve and the supply curve occurs on the “backward-bending” part of the labor supply curve (i.e. the part where the labor supply curve is downward sloping), but the demand curve is steep..

Government spending on the overall output of economy : The spending multiplier measures the effect of a change in government spending on the overall output of an economy, all other things being equal. If an increase of $10 billion in government spending produces an $11 billion increase in overall output,..

Extraordinary measures : In response to the recession of 2008, the US Federal Reserve Bank made several efforts to increase banks excess reserves, decrease interest rates for lending, and increase lending. These "extraordinary measures" have been somewhat controversial (at l..

Calculate profit-maximizing price-advertising expenditure : Suppose the demand for a new pharmaceutical drug, on which the manufacturer has a patent monopoly, is given by: Q(P,A) = (100 – P) ·A^0.5. Calculate the profit-maximizing price, advertising expenditure, and profits for the firm.

A large firm has two divisions : A large firm has two divisions: an upstream division that is a monopoly supplier of an input whose only market is the downstream division that produces the final output. To produce one unit of the final output, the downstream division requires one un..

Discuss both moral hazard and adverse selection issues : Your product fails about 2% of the time, on average. Some customers purchase the extended warranty you offer in which you will replace the product if it fails. Would you want to price the extended warranty at 2% of the product price? Discuss both mor..

Determine the optimal two-part pricing strategy : You are the manager of a monopoly. A typical consumer's inverse demand function for your firm's product is P = 250 − 40Q, and your cost function is C(Q) = 10Q. Determine the optimal two-part pricing strategy. How much additional profit do you earn us..

Describes the changes in inflation and in unemployment : The Case in Point titled “Some Reflections on the 1970s” describes the changes in inflation and in unemployment in 1970 and 1971 as a watershed development for macroeconomic thought. Why was an increase in unemployment such a significant event?

User Account

All Pages