Question: One and Only, Inc., 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 (thousands of dollars)

A = hundreds of dollars of advertising expenditures

The firm's average variable cost function is

AVC = Q² - 10Q + 60

Y is equal to 3 (thousand) and A is equal to 3 (hundred) for the period being analyzed.

a. If fixed costs are equal to $1,000, derive the firm's total cost function and marginal cost function.

b. Derive a total revenue function and marginal revenue function for the firm.

c. Calculate the profit-maximizing level of price and output for One and Only.

d. What profit or loss will One and Only earn?

e. If fixed costs were $1,200, how would your answers change for Parts (a) through (d)?