econ 460

posted by .

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?

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. Econ help.

    The following is proposals on reducing expenditure on drug. A: reduce prices by restrictly supply B: raise prices (by legalizing distribution) C: Do nothing What does each of them think about the elasticity of demand for the drug?
  2. Managerial Economics/Math

    This is an MBA-level Managerial Economics course. I am working on a homework assignment and have a couple problems that I don't really know how to get started. Here is another: Assume that a drug manufacturer sells a major drug in …
  3. economics

    HELP!!!!! One and only Inc is a monopolist. The demand function for its product is estimated to be Q=60-0.4P +6Y+2A Y=3,000 P=Price per Unit Y=Per capita disposable personal income (thousands of dollars) A=hundreds of dollars of advertising …
  4. economics

    Assume the graph below represents the market demand for a patented prescription drug together with the firm-level marginal cost and average cost functions for producing the drug. Assume these cost curves do not reflect R&D costs of …
  5. economics

    Assume the graph below represents the market demand for a patented prescription drug together with the firm-level marginal cost and average cost functions for producing the drug. Assume these cost curves do not reflect R&D costs of …
  6. Algebra

    83. Minimizing Marginal Cost The marginal cost of a product can be thought of as the cost of producing one additional unit of output. For example, if the marginal cost of producing the 50th product is $6.20, it cost $6.20 to increase …
  7. Math, mathematics of finance

    I am stuck on these two math questions. If nyone could help me solve them it would be greatly appreciated! Here is the information: Engineering estimates indicate that the variable cost of manufacturing a new product will be $35 per …
  8. economics

    6)Assume the graph below represents the market demand for a patented prescription drug together with the firm-level marginal cost and average cost functions for producing the drug. Assume these cost curves do not reflect R&D costs …
  9. MATHS

    A company is a monopolist. The demand function for its product is as follows: Q = 60 – 0.4P + 6Y + 2A Where Q = quantity sold in units P = Price per unit Y = per capita disposal income (thousands of dollars) A = hundreds of dollars …
  10. Math

    For xyz manufacturing the fixed costs are $1200, material and labor costs combined are $2 per unit, and the demand equation is: p=100/√q What level of output will maximize profit?

More Similar Questions