A company Cureall has discovered an instant cure to the common cold, it is the only...

A company Cureall has discovered an instant cure to the common cold, it is the only company that has the formula for this drug. Market research has revealed that demand for this product is P = 700−4Q, where Q represents the market supply of doses (in thousand) and P represents the market price. Cureall’s total cost function is C(Q) = 60Q.

(a) Consider Cureall as a monopolist who maximises its profit. How much should Cureall charge for a dose of the drug? How much profit would Cureall make? How much would the total surplus be?

(b) Suppose that Cureall is sold to a charitable organisation whose mission is to maximise total surplus. How many doses of the drug would the organisation produce? How much would the total surplus be in this case?

Expert Solution

Rahul Sunny answered 2 years ago

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