A drug company produces a new drug to treat baldness. The inverse demand curve for the drug is P = 205 - 20Q, where Q measures the number of pills in millions. The various costs of production are given by TC= 100 +5Q, ATC = 5 + 100/Q, and MC = 5. If the government grants this firm a patent, it will earn profits of . If the government revokes the patent, and the firm must sell its drug at marginal cost because of competition, it will earn profits or losses of $600 million; $500,000 $70 million; -$25 million $2 billion; $0 $400 million; -$100 million

A drug company produces a new drug to treat baldness. The inverse demand curve for the drug is P = 205 - 20Q, where Q measures the number of pills in millions. The various costs of production are given by TC= 100 +5Q, ATC = 5 + 100/Q, and MC = 5. If the government grants this firm a patent, it will earn profits of . If the government revokes the patent, and the firm must sell its drug at marginal cost because of competition, it will earn profits or losses of $600 million; $500,000 $70 million; -$25 million $2 billion; $0 $400 million; -$100 million

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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