-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 Prime Pharmaceuticals operates as a single-price monopoly, then there will be a deadweight loss equal to

Question

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In a single-price monopoly, the firm sets a price above marginal cost, leading to reduced quantity sold compared to a competitive market. The deadweight loss is the loss of total surplus due to this reduced quantity. Given the demand and marginal cost curves, the deadweight loss is calculated as the area of the triangle between the demand curve and the marginal cost curve over the range of quantities not sold due to the monopoly pricing. This area is $16 million.

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