A13.4 A large university recently began offering an online MBA program. This program is expected to generate substantial profit that will be used to improve the overall quality of research and education in the university’s business school. In order to publicize this new program, the university can purchase space on highway billboards. The demand function for the online MBA program is Q = 800 + 4A - 0.02P where Q is the number of students who enroll each year in the program, A is the number of billboard advertisements that the university purchases, and P is annual tuition price. Solving the demand function for P as a function of Q and A gives the inverse demand function for the MBA program:

P = 40,000 + 200A - 50Q The university’s cost of administering the online MBA program is TC = 10,000Q + 400A2

a. What are the profit-maximizing number of students that the university should enroll in the online MBA program each year and the profitmaximizing number of billboard advertisements that it should purchase?

b. What is the profit-maximizing tuition (P*) that the university should charge for the online MBA program?

c. What is the online MBA program’s economic profit (or loss)?