Questions: JRM is a monopolist in the market for a new drug, Econbrilliance. Using the graph below, determine what JRM's protitmaximizing price for Econbrilliance will be.

Solution Steps

To determine the profit-maximizing quantity, we need to find the point where the Marginal Cost (MC) curve intersects the Marginal Revenue (MR) curve. From the graph, this intersection occurs at a quantity of 30 units.

Once the profit-maximizing quantity is identified, we need to find the corresponding price on the Demand curve. At a quantity of 30 units, the price on the Demand curve is $8,000.

To ensure that this is the profit-maximizing condition, we check that the price ($8,000) is greater than the Average Cost (AC) at the quantity of 30 units. From the graph, the AC at 30 units is approximately $3,330, which is less than $8,000, confirming that the firm is making a profit.

Final Answer