D

Question 30

Suppose PharmaCorp is the only seller of a type of Medicine. The higher the price for Medicine, the smaller the quantity (Q)

sold. Demand for Medicine is given by the equation WTP - $50-$5Q. and PharmaCorp incurs a fixed cost of $40 and a unit

cost of $10, so its cost is given the equation C(Q)- $40+ $100.

Q

1

2

3

4

5

The table below partially presents consumers' willingness-to-pay (WTP), the monopolist's (or the price-setting firm's) total cost

(C(Q)), average cost (AC), marginal cost (MC), total revenue (R), marginal revenue (MR), and profit (n).

6

WTP

35

I

C

90

AC

23.33

16.67

MC

10

a. (2.5 points) What is the marginal cost when the output level is 5?

b. (2.5 points) At what quantity will PharmaCorp maximize its profit?

R

80

Owords

MR Profit

-5

15

10 pts/nQ

1

2

3

4

5

6

ginal co

WTP

35

ers' willingness-to-pay (WTP), the monopolists for the price-seting firms to t

C. total revenue (R), marginal revenue (MR), and profit (

с

$40+ $100.

50-$50, and PharmaCorp incirs a fond cost of $40

er the price for Medicine, the smaller they

90

AC

23.33

MC

a. (2.5 points) What is the marginal cost when the output level is 5?

b. (2.5 points) At what quantity will PharmaCorp maximize its profit?

16.67

10

R

80

c. (2.5 points) How much profit is the firm making at that quantity (in part (bi)?

d. (2.5 points) What is the marginal revenue when the output level is 6?

MR Profit

1-5

15

(hint: the fastest way to answer these questions are by doing the calculations as we did in class using the formula and applying

basic calculus; however, you can also complete the table and use that. Recall your understanding of marginal cost and marginal

revenue. For profit-maximizing output, what is the condition that has to be satisfied? Fun fact: You do not need to complete the

entire table!)