A pharmaceutical corporation has developed a unique new drug, making the company a monopoly. Demand for the new drug (D), the corresponding marginal revenue (MR), and the firm's cost structure (marginal cost is MC) are illustrated in the figure to the right.
A pharmaceutical corporation has developed a unique new drug, making the company a monopoly. Demand for the new drug (D), the corresponding marginal revenue (MR), and the firm's cost structure (marginal cost is MC) are illustrated in the figure to the right.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:**Concept: Profit Maximization Graph 2**
A pharmaceutical corporation has developed a unique new drug, making the company a monopoly. Demand for the new drug (D), the corresponding marginal revenue (MR), and the firm's cost structure (marginal cost is MC) are illustrated in the figure to the right.
**What are the company's profit-maximizing price and quantity?**
**Using the point drawing tool**, indicate the profit-maximizing price and quantity in the figure to the right. Label the point "Profit-maximizing."
**Carefully follow the instructions above, and only draw the required object.**
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**Instructions for Graph Creation:**
Click the graph, choose a tool in the palette, and follow the instructions to create your graph.
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**Graph Details:**
There is a section where users can select elements to create the graph. It includes options to "Delete" or "Clear All" for modifications.
- **Selected:** none (no elements are selected at the moment)
- A status bar indicating "All parts showing" also appears for user guidance.
**Note:** The actual graph is not visible in this transcription. This explanation assumes the presence of a graphical interface for educational interaction.
Transcribed Image Text:### Graph Analysis: Price vs. Quantity of Prescriptions
This graph displays the relationship between the price (in dollars per prescription) and the quantity (prescriptions per week in thousands). The graph includes three key lines, each representing different economic concepts:
1. **Demand Curve (D):**
- Depicted by the downward-sloping blue line.
- Demonstrates how the quantity demanded decreases as the price increases.
- Intersects the price axis (vertical) at $500 and the quantity axis (horizontal) at 10,000 prescriptions.
2. **Marginal Cost Curve (MC):**
- Represented by the upward-sloping brown line.
- Illustrates that as the quantity of prescriptions increases, the marginal cost increases.
- Starts at the origin (0, 0) and extends linearly upwards.
3. **Marginal Revenue Curve (MR):**
- Shown as a steeper downward-sloping blue line, positioned to the left of the demand curve.
- Indicates how the additional revenue changes with the quantity sold.
#### Graph Details:
- **Axes:**
- The Y-axis represents the price in dollars per prescription, ranging from $0 to $500.
- The X-axis represents the quantity of prescriptions per week, measured in thousands, ranging from 0 to 10.
- **Grid:**
- The graph is overlaid with a grid to facilitate the reading of values for both price and quantity.
- **Navigation Tools:**
- There are zoom tools on the right side of the graph, including a magnifier and an option to reset the graph view.
- **Interface Elements:**
- Options to "Delete," "Clear," and get "Question Help" are available at the bottom.
- The "Final Check" button is shown, possibly indicating a step to confirm the analysis or answers based on the graph.
This graph provides a visual representation of the economic principles of demand, marginal cost, and marginal revenue, crucial for understanding market behavior and pricing strategies in the context of prescription quantities.
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