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Assume the graph below represents the market demand for a patented prescription drug together with the marginal cost and average cost functions for producing the drug. (note: to simplify the problem, I have assumed that MC is constant @ $20 for all Q over 4 million, and that AFC is reduced essentially to 0 when Q reaches 5 million, Thus, the diagram assumes ATC = AVC= MC = $20 for all Q over 5 million)
a) Draw the marginal revenue function for this firm.
b) What is the profit-maximizing price for this firm?
c) On the graph show the area, this represents the net loss to society resulting from the monopoly power conferred by the patent.
d) What do you predict will happen to the structure of competition and to the price in this market when the patent expires? (Hint: use the concept of "Minimum efficient scale" of production in your answer.)
What is the marginal opportunity cost of services in each country? Who has the comparative advantage in factory-stuff?
Rachel utility function is given by U= I 1/2 , where I represents annual income in thousands of dollars. Assume Rachel is currently earning income of $23,000 (I =23) and can earn that income next year with certainty.
Compute total revenue, marginal revenue, marginal cost, and average total cost of this natural monopoly. What is the profit maximizing output and price for this natural monopoly when the government does not regulate it?
How will a fall in domestic investment affect the trade surplus and net capital outflows in the domestic economy, the trade deficit and capital inflows in the rest of the world.
Suppose that rich countries surprisingly commit to much higher official aid, to be maintained for several decades. What would be the effect of such aid on?
What happens to the equilibrium price and quantity in each market? Which product experiences a larger change in quantity? Which product experiences a larger change in price?
This document shows evaluation of alternative approaches to analysing the effectiveness of public policy and Assess the impact of government policies on selected areas.
You're the manager of copies are us. The only copy store in town, the carbon copy, recently got bids on adding a colour copier.
Consider economy that is above full-employment equilibrium (natural rate of output) because of an increase in AD. Prices of productive resources have'nt changed. With the help of graph
Suppose the price of food increases from Px1to Px2. On a clearly labelled graph, illustrate the income and substitution effects of the price change on the consumption of food.
Fill in the table indicating whether the new Each row and column heading describes a shock to a market initially in equilibrium. Fill in the table indicating whether the new equilibrium price and quantity will increase, decrease, or not change.
If the desired fiscal stimulus is $20 billion and the desired AD increase is $50 billion, we can conclude that the MPC is:
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