-Prime Pharmaceuticals has developed a new asthma medicine, for which 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 where the marginal revenue curve intersects the marginal cost curve, which is at 8 million inhalers. The corresponding price on the demand curve at this quantity is $6.

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