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Homework answers / question archive / A drug company has Monopoly on a new class of corticosteroid
A drug company has Monopoly on a new class of corticosteroid. The market demand is given by P=210−0.003QP=210−0.003Q. The monopolists costs are described by TC=3,000,000+3QTC=3,000,000+3Q. Calculate profit maximizing quantity, price, and profits.
Given P=210−0.003QP=210−0.003Q, the total revenue is:
The marginal revenue is thus:
Given TC=3,000,000+3QTC=3,000,000+3Q, the marginal cost is:
The profit-maximizing quantity can be found by equating marginal cost and marginal revenue:
So the profit maximizing quantity is 34,500 units.
The profit-maximizing quantity price is:
Profits at the maximizing quantity and price are given by:
So the profits are $570,750.