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

Consider Exhibit 9-3. Suppose GeneTech's patent expires and the market for the vaccine becomes perfectly competitive. Which of the following price and quantity combinations would be most likely?
A) $45 per dose and 100 doses per hour
B) $40 per dose and 200 doses per hour
C) $35 per dose and 300 doses per hour
D) $28 per dose and 450 doses per hour

Question

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

Consider Exhibit 9-3. Suppose GeneTech's patent expires and the market for the vaccine becomes perfectly competitive. Which of the following price and quantity combinations would be most likely?
A) $45 per dose and 100 doses per hour 
B) $40 per dose and 200 doses per hour 
C) $35 per dose and 300 doses per hour 
D) $28 per dose and 450 doses per hour

Quizplus · Accepted Answer

When a patent expires, the market becomes perfectly competitive, and the firm loses its monopoly power. Thus, the price and quantity will adjust to the market equilibrium, where the marginal cost equals marginal revenue, and the price equals the marginal cost. In this case, the marginal cost curve is shown by the upward-sloping curve, and the demand curve is shown by the downward-sloping curve. The intersection of these curves will determine the equilibrium price and quantity. The point where the marginal cost curve intersects the demand curve is closest to $28 per dose and 450 doses per hour, making option D the most likely choice.

Exhibit 3 Demand and Cost Curves for GeneTech, a Monopolist