At a factory, the CEO tries to maximize total sales

At a factory, the CEO tries to maximize total sales

At a factory, the CEO tries to maximize total sales in EUR, but profits should not go below a certain minimum, m. The total sales of the company in EUR, R, is a function of production, y, and advertising costs, a. R, y, a> 0. C (y) is the cost of running the company. R and C are differentiated functions and C ‘> 0 and ∂R/∂a > 0.

a) Set up the project to be solved.

b) Find the company’s profits. (Here you use Kuhn Tucker to max company sales)

c) Is the company’s output more or less than the output that gives the most profit? Is this outcome economically viable, for example, for the national economy? In what kind of market is the factory? Show all calculations and discuss the result.

d) What is the meaning of the result in c) if the consumer’s consumer value is u = min (ax, y) where y is the product that the factory produces, x is another product and a is fixed, a> 0? Justify.