Construct the relevant diagram, here are some instructions and assumptions: You will hand draw one (1) diagram
Question:
Construct the relevant diagram, here are some instructions and assumptions: You will hand draw one (1) diagram with an isoprofit curve, which is an adaptation of Figure 7.9d from the CORE ESPP text. An adaptation means that you modify the main diagram from the text to suit the case study at hand, for the drug to fight TB. Assume unit costs of production of this drug are a constant $5 per month. You are only required to draw one isoprofit curve with the profit-maximising price of $46. Be accurate when you draw your isoprofit curve, but there is no need to calculate with precision all the points on the isoprofit curve. Calculate and show workings of what the iso-profit would be for any price greater than $10 but less than $40 (pick any one price but stick to an integer). For the incremental quantities of drug production on the x-axis, use hypothetical values (rough guesses from your imagination). Also use your intuition for making up other prices/costs of the drug on the y-axis and make up a demand (straight-line) 'curve'. Calculate and show workings for the change in producer surplus and markup, but you only need to shade in the change in consumer surplus.