-Prime Pharmaceuticals has developed a new asthma medicine, for it has a patent. An inhaler can be produced at a constant marginal cost of $2/inhaler. The demand curve, marginal revenue curve, and marginal cost curve for this new asthma inhaler are in the figure above. With its patent giving it a monopoly for its new inhaler, if it is a single-price monopoly, Prime Pharmaceuticals will produce ________ inhalers and set a price of ________ for each inhaler.

Question

Quizplus · Accepted Answer

In a single-price monopoly, the firm maximizes profit where marginal revenue equals marginal cost. Given the marginal cost is $2, the firm will produce 8 million inhalers and set a price of $6, where the demand curve indicates consumers are willing to pay.

-Prime Pharmaceuticals Has Developed a New Asthma Medicine, for It