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1. (35 pts) The demand for a monopoly is Y = 100 P where Y is quantity and P is price. Marginal cost of production
1. (35 pts) The demand for a monopoly is Y = 100 P where Y is quantity and P is price. Marginal cost of production is 10. a. How much should the monopolist produce and what price should it set to maximize prot? Show the monopolist's problem and solution. b. Now assume that the monopolist also chooses advertising, A, to increase demand. In this case, the demand for a monopoly is Y = 100 P + A\"5 where Y is quantity, P is price and A is its advertising level. Marginal cost of production is still 10 and marginal cost of advertising is 1. How much should the monopolist produce, what price should it set to maximize prot and what is the optimal level of advertising? Show the monopolist's problem and solution
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