A firm (a monopoly) faces the inverse demand curve p = 400 - 5 y. Its marginal cost

is $ 12. The firm is controlled by a manager, who chooses the output to maximize the

business sales (not profit).

a) Explain why the manager is not trying to maximize profit.

b) Find the choice of y that maximizes sales.

c) How could the owner influence the manager to change his behavior?

d) Is total social welfare (which is equal to profits plus consumer surplus) more

high when the firm maximizes profits, or sales (for this part, no need to prove

your answer)?