Monopoly Issues with Some Math for Fun!

A recent discovery by Chemonomics, a pharmaceutical company in College Park, has resulted in the production of Relaxam, a drug that prevents test anxiety. Chemonomics has a patent on Relaxam, and the FDA has approved its sale.

a). According to Chemonomics' chief economist, the demand curve for Relaxam is described by the equation: P = 100-2Q, where Q is in thousands of exam doses. Chemonomics can produce Relaxam at a marginal cost of: MC = 40 + 2Q and an average cost of: AC = (100/Q) + 40 +Q

How much Relaxam will Chemonomics produce? At what price will it be sold?

b). What will the total revenue, total cost and profits be?

c). Explain and graph a rough sketch of changes to consumer surplus, producer surplus and deadweight loss due to a monopoly.

d). Explain why the above monopoly and indeed every monopoly desires to both minimize costs in the present and drive costs down in the future.