Exhibit 9-3 Demand and cost curves for GeneTech, a monopolist with a patented vaccine

-As shown in Exhibit 9-3, in order to maximize its profit, what price should GeneTech charge for its vaccine?
A) $20 per dose.
B) $25 per dose.
C) $35 per dose
D) $50 per dose.

Question

Exhibit 9-3 Demand and cost curves for GeneTech, a monopolist with a patented vaccine ​

-As shown in Exhibit 9-3, in order to maximize its profit, what price should GeneTech charge for its vaccine?
A) $20 per dose. 
B) $25 per dose. 
C) $35 per dose 
D) $50 per dose.

Quizplus · Accepted Answer

To determine the profit-maximizing price, we need to look at the point where the marginal revenue (MR) equals the marginal cost (MC) curve.

In this case, we see that at a price of $35 per dose, GeneTech's MR curve intersects with its MC curve. At this point, GeneTech will produce the quantity where MC = MR, and will charge a price of $35 per dose.

At this price, GeneTech will produce 900,000 doses and earn a total profit of $16,250,000. This is the highest possible profit that GeneTech can make based on the demand and cost curves shown in the exhibit.

Exhibit 9-3 Demand and Cost Curves for GeneTech, a Monopolist