Use the Figure Below to Answer the Following Questions

question 48

Multiple Choice

Use the figure below to answer the following questions.

Figure 13.4.6
-Prime Pharmaceuticals has developed a new asthma medicine, for which it has a patent. An inhaler can be produced at a constant marginal cost of $2 per inhaler. The demand curve, marginal revenue curve, and marginal cost curve for this new asthma inhaler are shown in Figure 13.4.6. The patent gives Prime Pharmaceuticals a monopoly for its new inhaler. If Prime Pharmaceuticals can perfectly price discriminate, then it

• A)sells 16 million inhalers.
• B)charges a price of $2 for each inhaler it sells.
• C)sells inhalers for $6 each.
• D)makes zero economic profit.
• E)Both A and B are correct.

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Definitions:

Maintenance Agreement

A contract between two parties in which one agrees to maintain an asset owned by the other party, in return for a fee.

Implicit Lease Rate

The interest rate assumed in the calculation of lease payments, not always explicitly stated in the lease agreement.

Discount Rate

The discount rate is the interest rate used in discounted cash flow (DCF) analysis to determine the present value of future cash flows.

Present Value Interest Factors

A factor used to calculate the present value of a future amount of money or stream of payments, considering a specific interest rate and time period.