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.
- Economics - economyst, Tuesday, October 30, 2007 at 9:48am
Marginal revenue is also known as Price (P). So, in rich countries MR=80. If it serves the poor countries MR=30. If it serves the poor countries with a goal of 6-million treatment and since it cannot prevent re-sale, price (MR) in the rich country also drops to 30.
Now then, MC is a constant 10. If it only serves the rich country, MR=80, meaning profit per treatment is 70. At 3-million sales, total profit becomes 210-million. If it serves both rich and poor, profit per treatment drops to 20. Total profit would be 9*20 = 180-million.
While I dont like the wording, c) seems to be the only possible correct answer.
- Economics - Nathan, Thursday, November 1, 2007 at 2:15am
Thanks for the help. I did end up getting the answer right, miscalculated the first couple times I did it.
MR = change in TR/ change in q
change in tr= ((9mil*30)-(3mil*80)
change in q= 9mil-3mil
Since 5 is less than mc, you have gone past the profit max. point and profit will fall.
Answer this Question
More Related Questions
- Quick math help - Can someone please check my math Hw? Thank you!! Solve each ...
- Geometry - 1. MO bisects LMN, LMN = 5x-23, LMO = x+32. Find NMO. >>I got ...
- Economics/social studies - This isn't an example of an invisible hand is it? A ...
- MATH - i need to write each expression as a product of the same factor: * = ...
- math exponents - i need to write each expression as a product of the same factor...
- Math add subtract fractions - Can you check my answers: 2) 5/8 - 1/4 i got: 3/8 ...
- math - I have 4 spinners each divided into 4 equal sections (labeled 1,2,3,4,) ...
- calculus - pleaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaasw help can you pleaaaaase ...
- Differential equation - y′=8e^(4x)(1+y2)solve for y(0)=−2 ⇒ y...
- Algebra - Use the formula C=2pi to find the radius, r, for a circle with a ...