Essay
Suppose a monopolist is considering starting a $500,000 advertising campaign.The current demand for its product is given by
p = 150 - 3Q
where Q is the quantity of output in thousands.If the monopolist undertakes the advertising campaign,it expects demand to increase to
p = 200 - 4Q
The (non-advertising)cost for the monopolist is C(Q)= 30Q.
a.Determine whether the monopolist should undertake the advertising campaign assuming that it is correctly anticipating the potential increase in demand.
b.What is the most the monopolist will invest towards this advertising campaign?
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