A monopolist producer of a drug has demand P=270 – 0.2q and costs C=5000+50q+0.2q.

a. Derive the MC, ATC, and MR functions.

b. Derive the profit-maximizing price, quantity, and profit. Show on a graph.

c. What is the price and quantity if the monopolist loses patent protection and the industry becomes perfectly competitive? What is the size of the deadweight loss in monopoly? Show the deadweight loss triangle in the graph.

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Expert Solution

Rahul Sunny answered 1 year ago

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