The following figure shows hypothetical demand, marginal revenue, marginal cost, and average total cost curves for Januvia, a patented medicine made by Merck & Company to help treat diabetes. Januvia has a very large market share in its market (that for DPP-4 inhibitors) because of its safety profile, so for simplicity we assume it is a monopoly. Use the figure to answer the following questions.

a. What is the profit-maximizing quantity and price? What is the average total cost of the profit-maximizing quantity?

b. Is Merck & Company making an economic profit or incurring an economic loss? How much is the economic profit or loss?

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Price and cost (dollars per pill) $9 $8 $7 $6 $5 I $4 $3 54 $2 $1 0 50 MR MC ATC D 100 150 200 250 300 350 400 Quantity (millions of pills per month)