Question

7. Gilead, Johnson and Johnson, Moderna, amongst other are rushing to develop a vaccine for COVID- 19. The organization to develop the vaccine will essentially have a monopoly due to patent rights and other barriers to entry such as costs, production, and expertise. Suppose Gilead develops a vaccine, their marginal cost of producing this vaccine is about $160 each dose, fixed costs such as R&D and production centers are $856 million, and the estimated inverse demand function was p= 1000 - 25Q where Q is in millions of shots. (a) (16 points) What was Gilead's average cost function? (b) (16 points) What was Gilead's marginal revenue function? (c) (16 points) Calculate the profit maximizing price and quantity. () (8 points) What is Gilead's profit? (e) (8 points) Calculate the Lerner Index at the profit maximizing price and quantity. (f) (16 points) What is the price elasticity at the profit maximizing price and quantity? Is it elastic, unit elastic, or inelastic?

Answer 1