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Monopoly also profit maximization
Suppose the graph below represents the marketplace demand for a patented prescription drug together with the marginal cost also average cost functions for producing the drug. (note: to simplify the problem, I have Supposed which MC is constant @ $20 for all Q over 4 million also which AFC is reduced essentially to 0 Whenever Q reaches 5 million, Thus, the diagram Supposes ATC = AVC= MC = $20 for all Q over 5 million)

A) Draw the marginal revenue function for this industry.

B) Illustrate what is the profit-maximizing price for this industry?

C) On the graph describe how the area, this represents the net loss to society resulting from the monopoly power conferred by the patent.

D) Illustrate what do you predict will happen to the structure of competition also to the price in this marketplace whenever the patent expires?

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M916360

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