Suppose a monopoly firm has the following Cost and Demand functions:
TC=4Q
P=24-Q
MC=4
MR=24-2Q
a. Carefully explain what the firm is doing and why.
b. Find the firm’s Profit maximizing Q
c. Find the firm’s Profit.
d. Suppose because of an advertising campaign, which costs $150, the monopoly’s
demand curve from #1 is: P=36-Q so its MR= 36-2Q. MC=4. Was the advertising
campaign successful? Explain carefully the effect of the advertising campaign on
the firm’s demand and cost function. Don’t just mention that profit rose or fell.