Question: PLE EC1002+ZA+Section+B+&+C+Only.pdf A+Section+B+&+C+Only.pdf + | [ Page view A Read aloud T Add Question 12 Luxvision is a monopoly supplier of sunglasses, for which the

PLE EC1002+ZA+Section+B+&+C+Only.pdf A+Section+B+&+C+Only.pdf + | [ Page view A Read aloud T Add Question 12 Luxvision is a monopoly supplier of sunglasses, for which the inverse demand curve is given by P = 10 --, where P denotes the price of sunglasses in pounds (E) and Q denotes the quantity of sunglasses demanded. Luxvision's marginal cost of production is E2. (a) Find Luxvision's profit maximising output, price and profits and illustrate Luxvision's decision in a diagram. [10 marks] (b) Luxvision can pay $1000 to run an advertising campaign that is expected to change inverse demand to P = 18 - . How will the campaign affect Luxvision's profit maximising output, price and profit level? Explain why the outcome is different from that found in (a). Should Luxvision pay for the campaign? [10 marks] (c) Use your diagram to compare the market outcome with and without the advertising campaign. Discuss how the campaign affects consumers and social welfare in the market for sunglasses. [10 marks]

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