Posted by **Anonymous** on Friday, April 30, 2010 at 12:40am.

1. The demand for a new drug is given by P = 4 – 0.5Q. The marginal cost of manufacturing the drug is constant and equal to $1 per unit. (Prices and costs are in terms of dollars, and quantities are in millions).

a. Illustrate on a diagram the following curves: demand, marginal cost, and marginal revenue.

b. If the firm receives a monopoly patent, what price does it charge and how much does it sell? Compute the firm’s surplus (profit) from selling the drug, not including fixed costs.

c. Suppose the fixed cost of developing the new drug is $6.5 million. Will the firm want to invest in developing the drug? Is the firm’s decision socially efficient?

## Answer this Question

## Related Questions

- economics - 6)Assume the graph below represents the market demand for a patented...
- economics - Assume the graph below represents the market demand for a patented ...
- economics - Assume the graph below represents the market demand for a patented ...
- Econ help. - The following is proposals on reducing expenditure on drug. A: ...
- Managerial Economics/Math - This is an MBA-level Managerial Economics course. I ...
- Economics - 5. A firm's marginal cost of production is constant at $5 per unit, ...
- Economics - Sorry, it's long. I've tried everything to solve this, I have no ...
- economics - suppose a competitive market consists of identical firms with a ...
- Math, mathematics of finance - I am stuck on these two math questions. If nyone ...
- econ - 12. A monopolist faces a constant marginal cost of $1 per unit. If at ...