Exhibit 8-3 Demand and cost curves for GeneTech, a monopolist with a patented vaccine

-As shown in Exhibit 8-3,in order to maximize its profit,what price should GeneTech charge for its vaccine?
A) $20 per dose.
B) $25 per dose.
C) $35 per dose
D) $50 per dose.

Question

Exhibit 8-3 Demand and cost curves for GeneTech, a monopolist with a patented vaccine
 
-As shown in Exhibit 8-3,in order to maximize its profit,what price should GeneTech charge for its vaccine?
A) $20 per dose. 
B) $25 per dose. 
C) $35 per dose 
D) $50 per dose.

Quizplus · Accepted Answer

In order to maximize profit, a monopolist like GeneTech should produce where marginal revenue equals marginal cost. In Exhibit 8-3, the marginal cost curve intersects the marginal revenue curve at a quantity of 4 million doses. At this quantity, the corresponding price on the demand curve is $35 per dose, which is the price GeneTech should charge to maximize its profit. Therefore, the best choice is C) $35 per dose.

Exhibit 8-3 Demand and Cost Curves for GeneTech, a Monopolist