A firm faces a price equation P = 12.5 + .5A.5 − .25Q and a cost equation C = 5Q + A, where Q denotes its output and A denotes its level of advertising expenditure.
a. Create a spreadsheet to describe the firm's profit as it varies with output and advertising. Set advertising spending at 50 and find the firm's optimal level of output.
b. Use your spreadsheet's optimizer to find the firm's optimal output and level of advertising spending?