The diagram below shows the demand curve and marginal cost and marginal revenue curves for a new heart medication for which the pharmaceutical firm holds a 20-year patent on its production and sales.This protection gives the firm monopoly power for the 20 years of the patent.
FIGURE 10-6
-Refer to Figure 10-6.Assume this pharmaceutical firm is practicing perfect price discrimination among its buyers.At its profit-maximizing level of output it will produce

Question

The diagram below shows the demand curve and marginal cost and marginal revenue curves for a new heart medication for which the pharmaceutical firm holds a 20-year patent on its production and sales.This protection gives the firm monopoly power for the 20 years of the patent.
  FIGURE 10-6
-Refer to Figure 10-6.Assume this pharmaceutical firm is practicing perfect price discrimination among its buyers.At its profit-maximizing level of output it will produce

Quizplus · Accepted Answer

Under perfect price discrimination, the firm will produce where marginal cost equals marginal revenue, which is at Q1, and charge each consumer their maximum willingness to pay, which means the price on the last unit sold will be p1.

The Diagram Below Shows the Demand Curve and Marginal Cost