Question

ECO 222 CLASS ACTIVITY 6 MONOPOLY Refer to the following diagram, which shows the demand, marginal revenic, and cost curves for Gene Tech, a hypothetical monopoly firm that has invented a new vaccine that gives people increased resistance against the herpes virus SHA 2 3 4 Quanty of vaccine hundreds of s our) 1) How much vecine should Gene Tech produce to maximize its profit? 2) In order to maximize its profit, what price should Gene Tech charge for its vaccine? 3) What is the maximum hourly profit that Gene Tech can earn from its vaccine? 100227 polyactivity doc

Answer 1

Ans.1- 3 [ Profit is maximized for a Monopolist where MR =MC].

Ans.2- 35

Ans.3- Profit = (P-ATC)*Q = (35- 25)* 3 = 30.