Suppose the demand for a new pharmaceutical drug, on which the manufacturer has a patent monopoly, is given by:
Q(P,A) = (100 – P) ·A^0.5
Where Q is output per period, P is the price, and A is the current period promotional expenditure.
Total production costs are given by C(Q) = 60Q.
Question: Calculate the profit-maximizing price, advertising expenditure, and profits for the firm.