Macroeconomics
11th Edition
ISBN: 9781260506891
Author: Colander
Publisher: MCG
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Chapter 4, Problem 1QE
To determine
Explain the
Expert Solution & Answer
Explanation of Solution
According to the law of
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Students have asked these similar questions
MC
The diagram shows a pharmaceutical firm's demand
curve and marginal cost curve for a new heart medication
for which the firm holds a 20-year patent on its
production.
Assume this pharmaceutical firm charges a single price
for its drug. At its profit-maximizing level of output, it will
generate a total profit represented by
OA. areas J+K.
B. areas F+I+H+G+J+K
OC. areas E+F+I+H+G.
D. - it is not possible to determine with the informatio
OE. the sum of areas A through K.
(...)
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P1
Price
F
P2
E
H
0
G B
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MR
D
ō
Price
Quantity
$26
0
The marketing department of
$24 20,000
Johnny Rockabilly's record company
$22
40,000
has determined that the demand for his
$20
60,000
latest CD is given in the table at right.
$18
80,000
$16
100,000
$14
120,000
The record company's costs consist of a $240,000 fixed cost of recording the CD, an $8 per CD variable cost of
producing and distributing the CD, plus the cost of paying Johnny for his creative talent. The company is
considering two plans for paying Johnny.
Plan 1: Johnny receives a zero fixed recording fee and a $4 per CD royalty for each CD that is sold.
Plan 2: Johnny receives a $400,000 fixed recording fee and zero royalty per CD sold.
Under either plan, the record company will choose the price of Johnny's CD so as to maximize its (the
record company's) profit. The record company's profit is the revenues minus costs, where the costs include the
costs of production, distribution, and the payment made to Johnny.
Johnny's payment will be
be
under plan 2 as…
Which of the following is the best example of perfect price discrimination?
A. Universities give entry scholarships to poorer students.
B. Students pay lower prices at the local theatre.
○ C. A hotel charges for its rooms according to the number of days left before the check-in date.
○ D. People who collect the mail coupons get discounts at the local food store.
○ E. An airline offers a discount to students.
Chapter 4 Solutions
Macroeconomics
Ch. 4.1 - Prob. 1QCh. 4.1 - Prob. 2QCh. 4.1 - Prob. 3QCh. 4.1 - Prob. 4QCh. 4.1 - Prob. 5QCh. 4.1 - Prob. 6QCh. 4.1 - Prob. 7QCh. 4.1 - Prob. 8QCh. 4.1 - Prob. 9QCh. 4.1 - Prob. 10Q
Ch. 4 - Prob. 1QECh. 4 - Prob. 2QECh. 4 - Prob. 3QECh. 4 - Prob. 4QECh. 4 - Prob. 5QECh. 4 - Prob. 6QECh. 4 - Prob. 7QECh. 4 - Prob. 8QECh. 4 - Prob. 9QECh. 4 - Prob. 10QECh. 4 - Prob. 11QECh. 4 - Prob. 12QECh. 4 - Prob. 13QECh. 4 - Prob. 14QECh. 4 - Prob. 15QECh. 4 - Prob. 16QECh. 4 - Prob. 17QECh. 4 - Prob. 18QECh. 4 - Prob. 19QECh. 4 - Prob. 20QECh. 4 - Prob. 21QECh. 4 - Prob. 22QECh. 4 - Prob. 23QECh. 4 - Prob. 24QECh. 4 - Prob. 1QAPCh. 4 - Prob. 2QAPCh. 4 - Prob. 3QAPCh. 4 - Prob. 4QAPCh. 4 - Prob. 5QAPCh. 4 - Prob. 6QAPCh. 4 - Prob. 1IPCh. 4 - Prob. 2IPCh. 4 - Prob. 3IPCh. 4 - Prob. 4IPCh. 4 - Prob. 5IP
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- The diagram shows a pharmaceutical firm's demand curve and marginal cost curve for a new heart medication for which the firm holds a 20-year patent on its production. At its profit-maximizing level of output, it will generate a deadweight loss to society represented by what? A. There is no deadweight loss generated. B. Area H+I+J+K OC. Area H+I D. Area D + E ◇ E. It is not possible to determine with the information provided. (...) 0 Price 0 m H B GI A MR MC D Outparrow_forwardConsider the figure on the right. A single-price monopolist will produce ○ A. 135 units and charge a price equal to $32. B. 135 units and generate a deadweight loss. OC. 189 units and charge a price equal to the perfectly competitive price. ○ D. 189 units and charge a price equal to $45. () Dollars per Unit $45 $32 MR D 135 189 Output MC NGarrow_forwardSuppose 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…arrow_forward
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