The diagram below shows a pharmaceutical firm's demand curve and marginal cost curve for a new heart medication for which the firm holds a 20- year patent on its production. FIGURE 10- 5
-Refer to Figure 10- 5. Assume this pharmaceutical firm charges a single price for its drug. At its profit- maximizing level of output, consumer surplus is represented by

Question

The diagram below shows a pharmaceutical firm's demand curve and marginal cost curve for a new heart medication for which the firm holds a 20- year patent on its production.  FIGURE 10- 5
-Refer to Figure 10- 5. Assume this pharmaceutical firm charges a single price for its drug. At its profit- maximizing level of output, consumer surplus is represented by

Quizplus · Accepted Answer

At the profit-maximizing level of output, the price charged by the pharmaceutical firm is $50, and the quantity sold is 5 million units per year. The area under the demand curve and above the price line (or the marginal cost curve) represents consumer surplus. At the profit-maximizing level of output, this area is represented by D+E. Therefore, the correct answer is D.

The Diagram Below Shows a Pharmaceutical Firm's Demand Curve and Marginal