In October of 2004, British regulators were forced to suspend the license of a flu vaccine plant in Liverpool operated by the Chiron Corporation due to concerns over bacterial contamination. As a result, the market was less competitive and the remaining suppliers of the flu vaccine experienced an increase in their market power. Suppose that you are the manager of one of the remaining pharmaceutical companies still making this flu vaccine, and that the market for your company is represented by the following graph:

a. What price per dose should your company charge, and how many doses should it produce? 

b. Is the profit-maximizing price found in part (a) greater than the marginal cost of producing the good (yes or no)? 

c. Compare the marginal benefit and marginal cost at your company’s profit maximizing level of output (9 million). Are they equal or is one higher than the other? 

d. If this was a perfectly competitive market, what price would exist and how many units of the flu vaccine would be produced? 

e. Would this market be efficient if it was perfectly competitive?  

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Price ($ per dose) $44 $26 $8 Marginal revenue 9 11 18 Marginal cost 22 Quantity (millions of doses) Stevenson/Wolfers, Principles of Economics, 1e, 2020 Worth Publishers Demand