1. A monopolistic pharmaceuticals company produces a patented drug. In
one year, it could sell 400 000 prescriptions at a price of $20, or instead
it could sell 500 000 prescriptions at a price of $15.
a. Identify the marginal revenue associated with this range of the busi-
ness’s demand curve.
b. Since this company is a monopolist, what shape does its demand curve
have? How is the marginal revenue curve positioned relative to the
demand curve?
c. Draw the relevant range of this business’s demand curve and identify a
point on its marginal revenue curve. Plot two points on the demand
curve and one point on the marginal revenue curve. Remember to plot
marginal values such as marginal revenue halfway between the two rel-
evant quantities on the horizontal axis.