Suppose 4Sisters is a patented vaccine. Her producer is facing a linear demand function for 4Sisters. She manufactures at a constant marginal cost of $20. Reports indicate that she produces 12,000 units of vaccine. She charges a unit price of $400. She is making a positive economic profit of $1,500,000. Draw a well-labelled diagram to indicate the output decision, pricing decision, economic profit, and the resultant deadweight loss in the market for 4Sisters. Indicate key figures with reference to the above given information.

Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter24: Price-searcher Markets With High Entry Barriers
Section: Chapter Questions
Problem 13CQ
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Suppose 4Sisters is a patented vaccine. Her producer is facing a linear demand function for 4Sisters. She manufactures at a constant marginal cost of $20.

Reports indicate that she produces 12,000 units of vaccine. She charges a unit price of $400. She is making a positive economic profit of $1,500,000.

  1. Draw a well-labelled diagram to indicate the output decision, pricing decision, economic profit, and the resultant deadweight loss in the market for 4Sisters. Indicate key figures with reference to the above given information.

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