Suppose a drug company has a patent on acancer drug that allows it to enjoymonopolistic rents for the life of the patent.The patent is set to expire in one year. Atthat point all drug companies will haveaccess to the patent and be able to producegeneric versions of the cancer drug,transforming the market for this drug in aperfectly competitive market. Suppose themarket demand for the cancer drug beforeand after the patent expires is unchangedand given by p = 120 - 0.3Q. Suppose thatall firms (the monopolist as well as thegeneric drug firms) face the sameproduction cost C(Q) = 100 + 0.3Q + 0.2Q2.Question: Calculate the gain in total surplusthat results when the market for the cancerdrug switches from a monopolistic marketto a perfectly competitive market.

Answer: Demand function: p=120-0.3Q Cost function: CQ=100+0.3Q+0.2Q2 When the market switches from…

Answered: Suppose a drug company has a patent on…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose Bang Bang is the only local swimming pool. She believes that there are 10 potential customers. Each of them has an identical demand function of QI = 250 – 0.02P, with QI as the unit of services of each customer. She operates with a constant variable cost of $500 per unit of service. If Bang Bang can practice a two-part tariff with a membership arrangement, suggest the optimal pricing strategy. Show your calculations
You are an executive for Super Computer, Inc. (SC), which rents out super computers. SC receives a fixed rental payment per time period in exchange for the right to unlimited computing at a rate of P cents per second. SC has two types of potential customers of equal number-10 businesses and 10 academic institutions. Each business customer has the demand function Q = 10 - P, where Q is in millions of seconds per month; each academic institution has the demand Q = 8-P. The marginal cost to SC of additional computing is 2 cents per second, regardless of volume. a. Suppose that you could separate business and academic customers. What rental fee and usage fee would you charge each group? What would be your profits? b. Suppose you were unable to keep the two types of customers separate and charged a zero rental fee. What usage fee would maximize your profits? What would be your profits? c. Suppose you set up one two-part tariff-that is, you set one rental and one usage fee that both business…
Answer choices are first blank: negative, positive, zero second blank: an equal number of, fewer, more
The inverse demand function in an industry with two firms is given as p = 50 – 2y, where y is the industry demand and p is the price. The firms have different technologies at their production plants with costs given as c(y1) = 10y, and c2[y2) = 14y2, where y = y,+ y2. 1. If the firms merge into one firm and become a monopoly in the industry, what will be the output of the merged firm? Comment on what would happen to the production plants under one ownership. Find the equilibrium price and profit. 2. Compare and comment on the total industry profits in these three market structures. 3. Assuming the firms are Bertrand duopolists, what is likely to happen? Explain verbally (no need to solve the problem).
Your task is to show what the profit of this firm might look like using a key economics diagram. To make graphing easier, we will consider the price of the Ozempic drug for the middle-income country Bangladesh, which is $38 (assumed the profit-maximising price). For this task, you will be required to illustrate and explain to a typical first-year undergrad student who has no economics background the profit the firm makes at $38 per month, and what has happened to profit (producer surplus), markup, consumer surplus and the output if the price was reduced from $38 to $10 per month.
A pharmaceutical company is the only producer of a particular drug. It sells that drug in two countries, one rich and the other a development country. The inverse demand for the drug in the rich country is pr(qr) = 20 – 2qñ, and in the developing country it is pp(qp) 10- qp. The total cost of production is C(qR, qp) = (qr+qp)². What is the profit-maximizing quantity in the rich country, qR? (a) qR = 1 (b) qR = 3 (c) qR = 6 (d) qR 8 (e) qR 14
Question #4 is where I need help but Question #3 has relevant information
A firm sells its product to two groups of buyers: daytime buyers and nighttime buyers. There are 50 daytime buyers, all of whom have identical demands given by DD in the figure. There are 50 nighttime buyers, all of whom have identical demands given by DN in the figure. The firm's variable costs are constant (SMC = AVC = $12) and its total fixed cost is $250,000. The marketing director must devise a two-part pricing plan that will maximize the firm's profit. Price and cost ($ per unit) 100 12 0 Do: PD 100 -0.5Q, Multiple Choice Quantity Panel A - One Daytime buyer's demand A* = $1,472 A* = $2,178 A* = $3,872 SMC = AVC A* = $4,356 200 A* = $7,744 100 Assuming both daytime and nighttime markets are served, the optimal fixed access charge (4*) is 0 DN: PN 100 - QN SMC=AVC 100 Quantity Panel B - One Nighttime buyer's demand
A monopoly sells its good in the U.S. and Japanese markets. The American inverse demand function is Pa = 120-Q₂. and the Japanese inverse demand function is P₁ = 100-2Q₁ where both prices, p, and p,, are measured in dollars. The firm's marginal cost of production is m = $20 in both countries. If the firm can prevent resales, what price will it charge in both markets? (Hint: The monopoly determines its optimal (monopoly) price in each country separately because customers cannot resell the good.) The equilibrium price in Japan is $. (round your answer to the nearest penny)
If a monopolistically competitive firm is earning positive profits in the short-run, then we would expect more competition to enter the industry assuming there are no barrier to entry in the market: True or False
As a manager of a chain of movie theaters that are monopolies in their respective markets, you have noticed much higher demand on weekends than during the week. You therefore conducted a study that has revealed two different demand curves at your movie theaters. On weekends, the inverse demand function is P= 200.001Q; on weekdays, it is P= 15 -0.002Q. You acquire legal rights from movie producers to show their films at a cost of $25,000 per movie, plus a $2.50 "royalty" for each moviegoer entering your theaters (the average moviegoer in your market watches a movie only once). What type of pricing strategy should you consider in this case? First degree price discrimination O Block pricing O Second degree price discrimination O Third degree price discrimination What price should you charge on weekends? Instructions: Enter your response rounded to two decimal places. What price should you charge on weekdays? Instructions: Enter your response rounded to two decimal places.
The Star Theater is the only movie theater in Hollywood, SC, and therefore it has price-setting power. The Star Theater has two distinct types of customers: (i) senior citizens and (ii) non-senior citizens. The demand curve among senior citizens is: y₁ = 100-10p₁, for p₁ 10, where y₁ is the number of seats demanded by senior citizens at a senior citizen ticket price of p1. The demand curve among non-senior citizens is: y2 = 140-10p2, for p2 14, where y2 is the number of seats demanded by non-senior citizens at a non-senior citizen ticket price of p2. The Star Theater's cost function is C(31, 32) = C(y1 + y2) = F + (y1 + y2), where F is the fixed cost of operating the theater and y₁ and y2 are (as already defined) the number of senior citizen and non-senior citizen customers, respectively. By how much does the Star Theater increase profits if it operates as a third-degree price discriminator instead of as a single-price monopolist? $0 $10 $20 $30

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