Draw the demand curve, making sure to label the curve

Reference no: EM133442405

Question: The firm PHARMACO has just started producing a new prescription drug called NEWDRUG. There are no other similar drugs on the market and PHARMACO has exclusive rights to produce NEWDRUG.

PHARMACO estimates that the initial demand for NEWDRUG can be estimated as P = 1000 - 0.5Q where P is the price measured in dollars per unit and Q is the quantity measured in units of the drug.

PHARMACO believes the marginal cost of producing each unit of the drug will be equal to 0.25Q where Q is the quantity of the drug produced.
Using the graph paper below (or using your own graph paper), answer the following questions.

a. Draw the demand curve, making sure to label the curve.
b. Draw the marginal revenue curve, making sure to label the curve.
c. Draw the marginal cost curve, making sure to label the curve.
d. Using your diagram and assuming the monopoly will operate, determine the profit maximizing level of output for the monopolist and briefly explain your method.
e. Using your diagram, determine the profit maximizing price for the monopolist and briefly explain your method.
f. Shade the consumer surplus that results from the profit maximizing actions of the monopolist. Calculate the size of consumer surplus, making sure to show all of your supporting wo

Reference no: EM133442405

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