Question
6. Suppose that Earwig is a monopoly and produces a drug that cures ear infections. The price P=750-3Q represents the market demand per week, where
6. Suppose that Earwig is a monopoly and produces a drug that cures ear infections. The price P=750-3Q represents the market demand per week, where Q is the number of tablets. The marginal cost (MC) and average total costs (ATC) are equal to $60/tablet. (a) Suppose the monopolist calculates that profit is maximized by producing 30 tablets per week. Solve for the price charged. [3 points] (b) How much would have a competitive firm charged and produced? [4 points] (c) From a societal point of view does the profit-maximizing level of output by the monopolist represent an efficient level of output? Why or why not?
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