-Prime Pharmaceuticals has developed a new asthma medicine, for which is 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 Prime Pharmaceuticals operates as a single-price monopoly, then consumer surplus is ________ and producer surplus is ________.

Question

Quizplus · Accepted Answer

In a single-price monopoly, consumer surplus is the area above the price and below the demand curve, while producer surplus is the area below the price and above the marginal cost curve. Given the monopoly pricing, consumer surplus is $16 million and producer surplus is $32 million.

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