Treat the genetic cause of rare disorder

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Question

Apotheosis is a small pharmaceutical company that has just developed and patented the first drug to treat the genetic cause of a rare disorder and not simply its symptoms. You are managing the department in charge of setting the price and quantity for the company's drug. Your analysts have estimated that the market demand for this drug in the company's country, a, is given by: () = 1,050 - 4, where is the quantity of annual prescriptions and is the price for a yearly prescription of the drug. Your research department has run a statistical cost analysis which estimates that the cost of producing this drug is () = 70,125 + 0.01252. This implies a marginal cost of production of () = 0.025. a) Find the profit-maximizing price and quantity, and compute the firm's profit in this case. Should Apotheosis shut down in the short run? Justify your answer.

Reference no: EM133636601

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