Three versions of keynes famous general theory

Reference no: EM13898039

1.On Amazon.com, there are three versions of Keynes' famous General Theory: a hardcover for $19.13, paperback for $8.60, and a Kindle version for $1.00. There is not much difference in the cost of production between hardcover and paperback books (though there likely is for the Kindle e-book version), but hardcover books do tend to be published earlier than paperback versions of the same book. How do you explain the wide variety of prices for basically the same book?

2. For measuring consumer surplus, recall that area of a triangle = ½ * base * height.

Mirk Labs is a British pharmaceutical company that currently enjoys a patent monopoly in Europe, Canada, and the United States on Zatab (pronounced zay-tab ), an allergy medication. The global demand for Zatab is Q_d = 15.0-0.2P

where Q_d is annual quantity demanded (in millions of units) of Zatab, and P is the wholesale price of Zatab per unit. A decade ago, Mirk Labs incurred $60 million in research and development costs for Zatab. Current production costs for Zatab are constant and equal to $5 per unit.

a. What wholesale price will Mirk Labs set? How much Zatab will it produce and sell annually? How much annual profit does the firm make on Zatab?

b. The patent on Zatab expires next month, and dozens of pharmaceutical firms are prepared to enter the market with identical generic versions of Zatab. What price and quantity will result once the patent expires and competition emerges in this market? How much consumer surplus annually will allergy sufferers who take Zatab gain?

c. Calculate the annual deadweight loss to society due to the drug firm's market power in Zatab. What exactly does this deadweight loss represent?

d. Given your answer to part c, would it be helpful to society for competition authorities in Europe, Canada, and the United States to limit entry of generic drugs to just five years for new drugs? Why or why not?

3.After considering the situation of market power for Zatab and how it changed after the introduction of generics, consider situations of natural disasters and how governments respond to shortages resulting from them.

a. Read https://lawblog.legalmatch.com/2011/05/05/we-cant-stop-the-twisters-but-we-can-stop-price-gouging/ and comment on why anti-gouging laws can increase social welfare.

b. In contrast, read https://cafehayek.com/2012/11/gouging-reality.html and comment on why anti-gouging laws may not increase social welfare, or at least why they may lead to consequences which are unintended by the government.

c. Which argument do you find more persuasive, and why? I.e., should governments continue to use anti-gouging laws to correct supposed market failures occurring after natural disasters?

Reference no: EM13898039

Questions Cloud

F there is an increase in labor productivity : f there is an increase in labor productivity, there will be a: A. Leftward shift of the labor supply curve B. Rightward shift of the labor supply curve

What factors affect the supply and demand : Select a good or service that you are familiar with (perhaps, a good that your company produces or a good or service that you like to buy). What factors affect the supply and demand of this good or service? How do you expect the equilibrium quantity

Three versions of keynes famous general theory : 1.On Amazon.com, there are three versions of Keynes' famous General Theory: a hardcover for $19.13, paperback for $8.60, and a Kindle version for $1.00. There is not much difference in the cost of production between hardcover and paperback books (tho..

Find a bound on the roots of the polynomial : Let P(x) = xn + an-1xn-1 + an-2xn-2 + ··· + a1x + a0 and T:= 1 + max(0≤i≤n-1) |ai|. Find a bound on the roots of the polynomial P(x) = -7x4 + 2x3 - 3x2 + 4x +5 and relate it to the actual values of the roots

Does either country have absolute : Does either country have absolute and/or comparative advantage in any product?Provide support for your answer by computing the opportunity costs for both products in bothcountries.

What is evil? : What is Evil?

What is the hallmark of an assembly language : What is the hallmark of an assembly language? Distinguish between an assembler and a compiler. Distinguish between a compiler and an interpreter.

User Account

All Pages