Firm A is a monopolist. The demand function for its product is estimated to be:

Q = 60 - 0.4P + 6Y + 2A

where Q = quantity of units sold

P = price per unit

Y = per capita disposable personal income ($)

A = advertising expenditures ($)

The firm's average cost function is:

AVC = Q2 10Q + 60

Y is $3 and A is $3 for the period being analysed.

QUESTIONS:

i) Calculate the profit-maximising level of price and output for Firm A.

ii) What profit or loss will Firm A earn?

iii) If fixed costs were $1,200, how would your answers change for (i) and (ii)?