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- 2. The market for EpiPens Consider the pharmaceutical company Mylan that produces epinephrine injection devices called EpiPens. In the presence of other firms producing substitutes for this good, the price of EpiPens is $150. Now suppose that competitors to Mylan no longer produce epinephrine injection devices, so Mylan now has pricing power in this market. As the economist on staff at Mylan, you are charged with the task of figuring out what your company's new pricing strategy should be. The following graph shows the marginal cost (MC), which is assumed to be constant, and the average total cost (ATC) of Mylan. The graph also shows the demand curve (D) for EpiPens and the marginal revenue curve (MR) once the firm has market power. On the graph, use the grey point (star symbol) to indicate the quantity of EpiPens demanded if Mylan continues to charge $150. Dashed drop lines will automatically extend to both axes. PRICE (Dollars per EpiPen) 1000 900 800 700 600 500 400 300 200 100 0 0 +…am. 122.2. Suppose that the market for wind chimes is a competitive market. The following graph shows the daily cost curves of a particular firm operating in this PRICE (Dollars per wind chime) 40 36 32 28 24 20 16 2 8 4 0 0 MC ATC AVC 2 4 QUANTITY (Thousands of wind chimes per day) 6 8 10 12 14 16 18 20 market: a) In short run, at a market price of $26 per wind chime, how much will firm choose to produce per day? How do you know? b) If the market price is $26 in the short run, and the firm chooses to produce the quantity you obtained in question (a), indicate the area that represents firm's profit or loss in short run on the graph. c) What is this firm's shutdown price, that is the price below which it is optimal for the firm to shut down in short run? d) In the long run, all firms can enter and exit the market, and all entrants have the same costs as above. As this market makes the transition to its long-run equilibrium, will the price rise or fall? Will the quantity demanded rise or fall?…
- Consider the market for sweaters in a Hamilton neighbourhood shown in the figure to the right. The consumer surplus generated by consuming the 30th sweater is OA. $89.10. E O B. $79.20. OC. $49.50 O D. $39.60. OE. $19.50. 99 Price (3 69.0 49.5 30.0 Sweater Market 30.0 49.5 Quantity (Sweaters per week) Q S QIn graph A below shows the market demand and supply in a competitive market, and graph B shows the cost curves of a representative firm in that industry. a. What are the market equilibrium price and quantity? Equilibrium price: $ Quantity traded:b. At equilibrium, what quantity is the firm producing? What is its total profit or loss? Leave no cells blank - be certain to enter "0" wherever required. Quantity: Total profit or loss $2. Given the following diagram, answer the questions. a) What is the price and quantity for monopoly? b) What is the price and quantity for perfect competition? c) Calculate the consumer surplus under perfect Price/Cost 30 competition. d) Calculate the consumer surplus under monopoly. e) Calculate the profit taken away as the profit but the firm. 20 f) What is the deadweight loss due to rent seeking? MC-AC 10 MR 50 100 Quantity
- 1. The Reinheitsgebot is a set of laws established in the 1500s that regulate the production and sale of beer in Germany. Among its provisions, the edict set maximum prices that brewers could charge at various times of the year: During Oktoberfest, the price for one [Bavarian Liter] is not to exceed one Pfennig (Penny, Munich value). Suppose that the demand for beer is given by $QD = 6000-1600P, and the supply of beer is given by QS = -1000+2000P. a) If a 1-Pfennig price ceiling is imposed, does the price ceiling make society better off? Does it make beer producers better off? Does it make beer drinkers better off?What is meant by consumer surplus and producer surplus? Using a diagram show that there is a deadweight loss to society from monopoly in terms of total surplus.1. Consider the market for lattes in Milwaukee, as described below: Price (per latte) $4.50 S 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0 200 600 1,000 1,400 1,800 Quantity of lattes (in cups) Suppose that Milwaukee imposes a price floor of $2.50 on lattes. Calculate each of the following quantities, showing your work or describing how you found the answer. Please also show each quantity on the graph. A. Surplus/Excess Quantity. B. Deadweight loss. C. Consumer Surplus. D. Producer Surplus. E. Transfer from consumers to producers.
- Assume that the market for house cleaning in Richmond is free and competitive, without taxes or externalities and that daily 2,000 housing units are cleaned. p* D Q* Q Q* Q Your friend suggests that it would be more efficient if less house cleaning took place in Richmond, say 1,500. (S)he argues that the less is cleaned, the greater the total surplus. Do you agree? O a. Hard to say. If demand is really elastic, then maybe. O b. Yes. Less cost is always more efficient. Oc No. If output is lower than equilibrium output, marginal social cost> marginal social benefit, resulting in DWL of underproduction. O d. No. If output is lower than equilibrium output, marginal social cost marginal social benefit. resulting in DWL of underproduction. O e. None of the answers offered are accurate.3. Recently, the Obama administration proposed a $1.00 per unit (pack) excise tax on cigarettes (which would be imposed legally or statutorily on cigarettes sellers). Some news reports have suggested that the proposed tax would increase cigarettes prices by $1.00 per pack and be paid by smokers (cigarette buyers). Using (separate) competitive supply and demand diagrams of the cigarettes market carefully show and explain TWO extreme demand and supply conditions under which these news reports would be true?Can you explain this please
