Answer to Question #158438 in Macroeconomics for sara

Question

The global pandemic 2020 has promoted a race to capture the market for introducing effective vaccine and treatments.

a.      If PFIZER is the sole vaccine provider given the following information, answer the questions below:                                                                                                (3 Marks)

Output

Price/Unit

Total Cost

1

5500

1000

2

5000

1200

3

4500

1500

4

4000

2500

5

3500

4000

6

3000

5700

7

2500

7500

8

2000

9400

9

1500

11400

10

1000

13500

 

                               i.           Given the tabular information above find the profit-maximizing output and price also illustrate the same using the two-dimensional labeled diagram. Show the calculation as well.                                                                                

 

b.      Assume if many firms enter into the business of providing vaccine determine:  (2 Marks)

                               i.           How the demand curve of PFIZER would change and how it would now maximize its profit? The kind of market structure now PFIZER is forced to operate in? Also, illustrate the same using the two-dimensional labeled diagram.

 

 

 

 

 

Answer 1

a)

Q P TC

1 5500 1000

2 5000 1200

3 4500 1500

4 4000 2500

5 3500 4000

6 3000 5700

7 2500 7500

8 2000 9400

9 1500 11400

10 1000 13500

i. Given the tabular information above the profit-maximizing output is Q = 5 units (at this point MR = MC) and price is P = 3500.

b) If many firms enter into the business of providing vaccine, then the demand curve of PFIZER would decrease and become flat, now it would maximize its profit at P = MC.The kind of market structure now PFIZER is forced to operate in is perfect competition.