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July 1, 2015

Homework Help: Economics

Posted by Nathan on Monday, October 29, 2007 at 5:38pm.

Sorry, it's long. I've tried everything to solve this, I have no clue how they got any of the MR figures, I calculated MR and I got 0.5. Help please.

* A drug company currently sells 3 million AIDS treatments in rich countries at P = $80 per treatment.
* In order to sell 6 million AIDS treatments in poor countries the drug company would have to lower price to $30 per treatment.
* Marginal cost is constant and equal to $10 per treatment in both countries.
* If the drug company cannot prevent re-sale between rich and poor countries then the marginal revenue per treatment of increasing output from 3 million (serve rich only) to 9 million (serve both rich and poor) is equal to___



a. $30 per treatment which is greater than the marginal cost of $10 per treatment and thus implies that profits will rise if the poor buyers are served.
b. $5 per treatment which is less than the marginal cost of $10 per treatment and thus implies that profits will fall if the poor buyers are served.
c. $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 if the poor buyers are served.
d. $30 per treatment which is greater than zero and thus implies that profits will rise if the poor buyers are served.
e. $20 per treatment which is greater than the marginal cost of $10 per treatment and thus implies that profits will rise if the poor buyers are served.

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