2. Smile Bright toothpaste company has determined that the demand for its product depends on advertising expenditures A (in thousands of dollars) and the price charged P (in dollars) according to Q = 32A12- 64P, where Q is the umber of tubes of toothpaste sold. The company's marginal costs of production are constant and equal to 50 cents per tube. A. What levels of output, advertising expenditures, and price will maximize the firm's profits? B. Verify at the solution you have found in part A that the marginal revenue from advertising equals the price elasticity of demand.

2. Smile Bright toothpaste company has determined that the demand for its product depends on advertising expenditures A (in thousands of dollars) and the price charged P (in dollars) according to Q = 32A12- 64P, where Q is the umber of tubes of toothpaste sold. The company's marginal costs of production are constant and equal to 50 cents per tube. A. What levels of output, advertising expenditures, and price will maximize the firm's profits? B. Verify at the solution you have found in part A that the marginal revenue from advertising equals the price elasticity of demand.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter14: Monopoly

Section: Chapter Questions

Problem 10PA

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