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Suppose a drug company cannot prevent resale between rich and poor countries and increases output from 3 million (serving only the rich country with a price of $80 per treatment) to 9 million (serving both the rich and the poor countries with a price of $30 per treatment). Marginal cost is constant and equal to $10 per treatment in both countries. The marginal revenue per treatment of increasing output from 3 million to 9 million is equal to ○ A. $20 per treatment, which is greater than the marginal cost of $10 per treatment and thus implies that profits will rise. ○ B. $20 per treatment, which is greater than zero and thus implies that profits will rise. ○ C. $30 per treatment, which is greater than the marginal cost of $10 per treatment and thus implies that profits will rise. ○ D. $5 per treatment, which is less than the marginal cost of $10 per treatment and thus implies that profits will fall. ○ E. $30 per treatment, which is less than the marginal revenue of $80 per treatment received from the rich buyers and thus implies that profits will fall.

Suppose a drug company cannot prevent resale between rich and poor countries and increases output from 3 million (serving only the rich country with a price of $80 per treatment) to 9 million (serving both the rich and the poor countries with a price of $30 per treatment). Marginal cost is constant and equal to $10 per treatment in both countries. The marginal revenue per treatment of increasing output from 3 million to 9 million is equal to ○ A. $20 per treatment, which is greater than the marginal cost of $10 per treatment and thus implies that profits will rise. ○ B. $20 per treatment, which is greater than zero and thus implies that profits will rise. ○ C. $30 per treatment, which is greater than the marginal cost of $10 per treatment and thus implies that profits will rise. ○ D. $5 per treatment, which is less than the marginal cost of $10 per treatment and thus implies that profits will fall. ○ E. $30 per treatment, which is less than the marginal revenue of $80 per treatment received from the rich buyers and thus implies that profits will fall.

Principles of Economics 2e
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter9: Monopoly
Section: Chapter Questions
Problem 26CTQ: Why are generic pharmaceuticals significantly cheaper than name brand ones?
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Suppose a drug company cannot prevent resale between rich and poor countries and increases output from 3 million (serving only the rich country with a price of $80 per treatment) to 9 million (serving both the rich and the poor countries with a price of $30 per treatment). Marginal cost is constant and equal to $10 per treatment in both countries. The marginal revenue per treatment of increasing output from 3 million to 9 million is equal to ○ A. $20 per treatment, which is greater than the marginal cost of $10 per treatment and thus implies that profits will rise. ○ B. $20 per treatment, which is greater than zero and thus implies that profits will rise. ○ C. $30 per treatment, which is greater than the marginal cost of $10 per treatment and thus implies that profits will rise. ○ D. $5 per treatment, which is less than the marginal cost of $10 per treatment and thus implies that profits will fall. ○ E. $30 per treatment, which is less than the marginal revenue of $80 per treatment received from the rich buyers and thus implies that profits will fall.
Transcribed Image Text:Suppose a drug company cannot prevent resale between rich and poor countries and increases output from 3 million (serving only the rich country with a price of $80 per treatment) to 9 million (serving both the rich and the poor countries with a price of $30 per treatment). Marginal cost is constant and equal to $10 per treatment in both countries. The marginal revenue per treatment of increasing output from 3 million to 9 million is equal to ○ A. $20 per treatment, which is greater than the marginal cost of $10 per treatment and thus implies that profits will rise. ○ B. $20 per treatment, which is greater than zero and thus implies that profits will rise. ○ C. $30 per treatment, which is greater than the marginal cost of $10 per treatment and thus implies that profits will rise. ○ D. $5 per treatment, which is less than the marginal cost of $10 per treatment and thus implies that profits will fall. ○ E. $30 per treatment, which is less than the marginal revenue of $80 per treatment received from the rich buyers and thus implies that profits will fall.
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