Suppose XER Inc. is a monopoly that produces a drug thatcures the common cold. The weekly (inverse) market demand* for itsproduct takes the form P=580-6Q, where Q is measured as the numberof tablets. The marginal and average costs are $100 pertablet.
Solve for:
(a)Ă‚Â Ă‚Â Solve for the weekly level of output(measured in the number of tablets per week) that will be producedby XER Inc. if it maximizes profits
(b) Solve for
(i) the profit-maximizing price-per tabletcharged,
(ii) total weekly revenue and
(iii) the amount of economic profits earned by XER,Inc.
(c)
(i) Calculate the weekly quantity sold
(ii) Calculate the total weekly revenues for XER, Inc.IF the firm operated under perfectly competitive market conditions(i.e., assume that that XER faces the same demand curve but that,as in competitive markets, the equilibrium price and quantity iswhere P=MC.)
(d)
Compare answers to sub-questions a & b to those forsub-question c and assess the differences in output, prices, totalrevenues, total costs and economic/excess profits under the twodifferent market conditions.
