2. Acme Pharmaceutical Company discovers a vaccine that prevents thecommon cold and has a patent that grants it a monopoly on thisdrug. Acme has plants in both the North America and Europe andcan manufacture the drug on either continent at a marginal cost of$10. Assume there are no fixed costs. In Europe, the demand for thedrug is QE = 70 - PE, where QE is the quantity demanded when theprice in Europe is PE. In North America the demand for the drug isQN 110 PN, where QN is the quantity demanded when the pricein North America is PN= (d) Calculate total surplus, which is consumer plus producer sur-plus/profits, under each scenario b) and c). Will total surplus behigher with price discrimination or without price discrimination?Will the firm sell the drug on both continents in both scenarios?(e) Consider the problem with the following change. Suppose thedemand for the drug in Europe declines to QE = 30 - PE. If thefirm cannot price discriminate, now will it be in the firms interestto sell on both continents?(f) Say now that the patent on the vaccine expires and generic manu-facturers can enter the market and produce the drug at the samemarginal cost. Assume that there are many generic drug compa-nies, and that competition is very high. What will be the equilib-rium price of the drug in this case? Compute total consumer andproducer surplus/profits in both markets in this case and compareit to d). Comment on the differences.

A monopoly firm operates in 2 markets:North AmericaEuropeCostsMC=$10No Fixed CostsDemand functionsQE…

Acme Pharmaceutical Company discovers a vaccine that prevents the common cold and has a patent that grants it a monopoly on this drug. Acme has plants in both the North America and Europe and can manufacture the drug on either continent at a marginal cost of $10. Assume there are no fixed costs. In Europe, the demand for the drug is QE 70 - PE, where Qe is the quantity demanded when the price in Europe is PE. In North America the demand for the drug is 110 — PN, where QN is the quantity demanded when the price in North America is PN E QN =

Acme Pharmaceutical Company discovers a vaccine that prevents the common cold and has a patent that grants it a monopoly on this drug. Acme has plants in both the North America and Europe and can manufacture the drug on either continent at a marginal cost of $10. Assume there are no fixed costs. In Europe, the demand for the drug is QE 70 - PE, where Qe is the quantity demanded when the price in Europe is PE. In North America the demand for the drug is 110 — PN, where QN is the quantity demanded when the price in North America is PN E QN =

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter9: Monopoly

Section: Chapter Questions

Problem 7SQP

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Similar questions

Imagine that you ale managing a small firm and thinking about entering the market of a monopolist. The monopolist is currently charging a high price, and you have calculated that you can make a nice profit charging 10 less than the monopolist. Before you go ahead and challenge the monopolist, what possibility should you consider for how the monopolist might react?
Can you think of any examples of successful predatory pricing in the real world?
Draw a monopolists demand curve, marginal revenue, and marginal cost curves. Identify the monopolists profit-maximizing output level. Now, think about a slightly higher level of output (sayQ0+1). According to the graph, is there any consumer willing to pay more than the marginal cost of that new level of output? If so, what does this mean?
How can a monopolist identify the profit-maximizing level of output if it knows its total revenue and total cost curves?
2. Acme Pharmaceutical Company discovers a vaccine that prevents the common cold and has a patent that grants it a monopoly on this drug. Acme has plants in both the North America and Europe and can manufacture the drug on either continent at a marginal cost of $10. Assume there are no fixed costs. In Europe, the demand for the drug is QE = 70 PE, where QE is the quantity demanded when the price in Europe is PE. In North America the demand for the drug is QN = 110 - PN, where QN is the quantity demanded when the price in North America is PN (a) Determine the aggregate demand function for the combined mar- ket. Determine the inverse demand function for the combined market and the inverse demand functions for each of the two mar- kets separately. (b) To begin, assume that it is illegal for the firm to price discriminate, so that it can charge only a single price P on both continents. What price will it charge, and what profits will it earn?
O OO The above graph shows the market demand function for a product. Assume that the market is served by a perfectly-price-discriminating monopolist with a constant marginal cost of production equal to $4 (MC = $4) and no fixed cost (FC = 0). The deadweight loss equals: DWL - $72 DWL - $0 DWL- -$48 DWL - $84 DWL-$36 $30 $28 $26 $24 $22 $20 Question 23 $18 $16 $14 $12 $10 $8 $6 $4 $2 $0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Currently the market for domestic air travel in OzLand is a monopoly with Qanwings as the supplier. A new supplier, Cheap Flights, enters the market. Suppliers in the market compete by simultaneously choosing the quantity of flights they will supply. Which of the following is most likely to occur after the entry of the new supplier to the market for domestic air travel? a.The total quantity of flights will increase. b.The total quantity of flights will not change. c.The total quantity of flights will decrease. d. It is not possible to say what will happen to the quantity of flights.
Give typing answer with explanation and conclusion A monopolist has a demand curve given by P = 88 − Q and a total cost curve given by TC = 34 + Q2. The associated marginal cost curve is MC = 2Q. Suppose the monopolist also has access to a foreign market in which he can sell whatever quantity he chooses at a constant price of 60. How much will he sell in the foreign market? What will his new quantity and price be in the original market?
28 $55 $50 $45 MC АТС I of $40 $35 $30 $25 $20 Demand = P $15 $10 $5 $0 MR 40 80 120 160 200 240 Output (Q) The diagram above shows the Demand, MR, and cost curves for a monopolist in the short-run. At the profit maximizing Output (Q) level, the monopolist will earn a Total Profit of: Sel one: а. $1,200 b. $2,200 c. $800 d. $2,000 $$
. Until recently, the drug maker Pfizer enjoyed a monopoly of the cholesterol-control drug Lipitor because of patents rights. True or false
Price of laptops 1250 25 1000 50 750 75 500 100 250 125 Refer to the table shown, which shows the demand schedule for a firm that has a monopoly on the sale of laptops. If the marginal cost of producing laptops is $250 no matter how many laptops are produced and the monopolist seeks to maximize profit, it should set the price of laptops at: O 500 O Quantity Demanded per Year 1000 750 250
Exercise 5. You are the manager for a monopoly with costs, demand, and marginal revenueas in the graph at the top on Figure 1.a. Does the fact that you operate in a monopoly always guarantee that you can achievehigher profits by increasing the price? Explain.b. Draw the area representing the profits on the top graph on Figure 1.c. Suppose one of your suppliers just announced an increase in prices for a specific partthat your product requires. What should the impact be to each of the curves on thetop graph of Figure 1? Explain carefully.d. Suppose economic conditions change in such a way that the demand curve for yourcompany shifts left.i. Draw a demand curve on the bottom graph on Figure 1 that leads to zero economicprofits.ii. Draw a demand curve on the bottom graph on Figure 1 such that any furtherleftward demand shift will cause you to shutdown.