Question 4: Profit Maximization Use the table on the left to answer the following sub-questions. (Hint: It may be useful to draw a diagram based on the information provided to Price per Quantity Marginal Unit Demanded Revenue $100 $90 40 $90 help you visualize the question.) $80 80 $70 Imagine that a vaccine for COVID-19 is designed, patented and produced by PharmaCo, Inc.; so, now PharmaCo, Inc. is a monopolist producer of this new vaccine that everyone needs. Phar- maCo, Inc. has a constant marginal cost of pro- duction of $10 per unit of the vaccine. For sim- plicity, we will say that average total cost is also constant at $10 per unit. $70 120 $50 $60 160 $30 $50 200 $10 $40 240 -$10 $30 280 -$30 $20 320 -$50 $10 360 -$70 1. How many units of the vaccine will PharmaCo, Inc. produce and supply? Why? 2. How much profit is earned by Pharmaco, Inc. if it produces the quantity you mentioned above? 3. If Pharmaco, Inc. did not have a patent, and the market were perfectly competitive with all producers in the industry producing with a constant marginal cost of $10 per unit, what would be the equilibrium quantity?

Question 4: Profit Maximization Use the table on the left to answer the following sub-questions. (Hint: It may be useful to draw a diagram based on the information provided to Price per Quantity Marginal Unit Demanded Revenue $100 $90 40 $90 help you visualize the question.) $80 80 $70 Imagine that a vaccine for COVID-19 is designed, patented and produced by PharmaCo, Inc.; so, now PharmaCo, Inc. is a monopolist producer of this new vaccine that everyone needs. Phar- maCo, Inc. has a constant marginal cost of pro- duction of $10 per unit of the vaccine. For sim- plicity, we will say that average total cost is also constant at $10 per unit. $70 120 $50 $60 160 $30 $50 200 $10 $40 240 -$10 $30 280 -$30 $20 320 -$50 $10 360 -$70 1. How many units of the vaccine will PharmaCo, Inc. produce and supply? Why? 2. How much profit is earned by Pharmaco, Inc. if it produces the quantity you mentioned above? 3. If Pharmaco, Inc. did not have a patent, and the market were perfectly competitive with all producers in the industry producing with a constant marginal cost of $10 per unit, what would be the equilibrium quantity?

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter11: Public Goods And Common Resources

Section: Chapter Questions

Problem 9PA

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