Question: Consider a firm that faces the demand curve: ???? = 1050 ???? + 0.2B^0.5 and has total cost function: ???????? = 50???? + ????, where
Consider a firm that faces the demand curve: ???? = 1050 ???? + 0.2B^0.5 and has total cost function: ???????? = 50???? + ????, where B is the level of advertising expenditures, P is price, and Q is output. A. Derive ????(????), the profit function in terms of B. [Hint: Find the profit-maximizing quantity in terms of B and plug it into the profit function] B. Calculate the range of advertising spending, B, that increases this firm's profits above what it would get if it didn't advertise.
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