Homework Help is Here – Start Your Trial Now!
Business
Economics
1. MedicLab has a drug patent on an effective migraine headache medicine. MedicLab is currently earning an economic profit. (a) Draw a correctly labeled graph for MedicLab. In your graph, identify the following. a. MedicLab's profit-maximizing price and quantity, labeled and. b. MedicLab's area of economic profit (area should be shaded in). (b) The government is considering new anti-trust legislation and may regulate MedicLab's migraine medicine even though its patent is still valid. Show, on a graph, what price the government may require MedicLab to sell its migraine medication for if it wants MedicLab to produce at the following. а. The socially optimal level of output, labeled as or. b. The fair-return price, labeled as. (c) If the government decides to regulate MedicLab as in part (b) above, how will this affect the welfare of the consumers who purchase this migraine medication? Use a new graph to identify the consumer surplus for consumers in this market before and after regulation. Specifically, show on your graph and explain the differences in consumer surplus in each of the following situations. a. Consumer surplus without government regulation. b. Consumer surplus with regulation at the socially optimal output level. С. Consumer surplus with regulation at the fair-return price. (d) Assume that the government decides against regulating MedicLab's migraine medicine, but that the patent for the drug expires. Explain what happens to the following. а. MedicLab's profit-maximizing price and quantity. b. MedicLab's profit.

1. MedicLab has a drug patent on an effective migraine headache medicine. MedicLab is currently earning an economic profit. (a) Draw a correctly labeled graph for MedicLab. In your graph, identify the following. a. MedicLab's profit-maximizing price and quantity, labeled and. b. MedicLab's area of economic profit (area should be shaded in). (b) The government is considering new anti-trust legislation and may regulate MedicLab's migraine medicine even though its patent is still valid. Show, on a graph, what price the government may require MedicLab to sell its migraine medication for if it wants MedicLab to produce at the following. а. The socially optimal level of output, labeled as or. b. The fair-return price, labeled as. (c) If the government decides to regulate MedicLab as in part (b) above, how will this affect the welfare of the consumers who purchase this migraine medication? Use a new graph to identify the consumer surplus for consumers in this market before and after regulation. Specifically, show on your graph and explain the differences in consumer surplus in each of the following situations. a. Consumer surplus without government regulation. b. Consumer surplus with regulation at the socially optimal output level. С. Consumer surplus with regulation at the fair-return price. (d) Assume that the government decides against regulating MedicLab's migraine medicine, but that the patent for the drug expires. Explain what happens to the following. а. MedicLab's profit-maximizing price and quantity. b. MedicLab's profit.

Microeconomics A Contemporary Intro
Microeconomics A Contemporary Intro
10th Edition
ISBN:9781285635101
Author:MCEACHERN
Publisher:MCEACHERN
Chapter10: Monopolistic Competition And Oligopoly
Section: Chapter Questions
Problem 4QFR
See similar textbooks
icon
Related questions
Question

This is all the given information to solve this question. The graphs do not have to have any specific numerical values, just the trends and curves that need to represent the situation that is introduced in this question. I was told to "include correctly labeled diagrams, if useful or required, in explaining your answer. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes." (so no numerical values are really needed)

1. MedicLab has a drug patent on an effective migraine headache medicine. MedicLab is currently earning an economic profit. (a) Draw a correctly labeled graph for MedicLab. In your graph, identify the following. а. MedicLab's profit-maximizing price and quantity, labeled and. b. MedicLab's area of economic profit (area should be shaded in). (b) The government is considering new anti-trust legislation and may regulate MedicLab's migraine medicine even though its patent is still valid. Show, on a graph, what price the government may require MedicLab to sell its migraine medication for if it wants MedicLab to produce at the following. а. The socially optimal level of output, labeled as or. b. The fair-return price, labeled as. (c) If the government decides to regulate MedicLab as in part (b) above, how will this affect the welfare of the consumers who purchase this migraine medication? Use a new graph to surplus for consumers in this market before and after regulation. Specifically, show on your graph and explain the differences in consumer surplus in each of the following situations. entify the consumer а. Consumer surplus without government regulation. b. Consumer surplus with regulation at the socially optimal output level. С. Consumer surplus with regulation at the fair-return price. (d) Assume that the government decides against regulating MedicLab's migraine medicine, but that the patent for the drug expires. Explain what happens to the following. MedicLab's profit-maximizing price and quantity. a. b. MedicLab's profit.
Transcribed Image Text:1. MedicLab has a drug patent on an effective migraine headache medicine. MedicLab is currently earning an economic profit. (a) Draw a correctly labeled graph for MedicLab. In your graph, identify the following. а. MedicLab's profit-maximizing price and quantity, labeled and. b. MedicLab's area of economic profit (area should be shaded in). (b) The government is considering new anti-trust legislation and may regulate MedicLab's migraine medicine even though its patent is still valid. Show, on a graph, what price the government may require MedicLab to sell its migraine medication for if it wants MedicLab to produce at the following. а. The socially optimal level of output, labeled as or. b. The fair-return price, labeled as. (c) If the government decides to regulate MedicLab as in part (b) above, how will this affect the welfare of the consumers who purchase this migraine medication? Use a new graph to surplus for consumers in this market before and after regulation. Specifically, show on your graph and explain the differences in consumer surplus in each of the following situations. entify the consumer а. Consumer surplus without government regulation. b. Consumer surplus with regulation at the socially optimal output level. С. Consumer surplus with regulation at the fair-return price. (d) Assume that the government decides against regulating MedicLab's migraine medicine, but that the patent for the drug expires. Explain what happens to the following. MedicLab's profit-maximizing price and quantity. a. b. MedicLab's profit.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps with 4 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Total Cost
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Recommended textbooks for you
Microeconomics A Contemporary Intro
Microeconomics A Contemporary Intro
Economics
ISBN:
9781285635101
Author:
MCEACHERN
Publisher:
Cengage
ECON MICRO
ECON MICRO
Economics
ISBN:
9781337000536
Author:
William A. McEachern
Publisher:
Cengage Learning
Principles of Microeconomics (MindTap Course List)
Principles of Microeconomics (MindTap Course List)
Economics
ISBN:
9781305971493
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Economics, 7th Edition (MindTap Cou…
Principles of Economics, 7th Edition (MindTap Cou…
Economics
ISBN:
9781285165875
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Microeconomics
Principles of Microeconomics
Economics
ISBN:
9781305156050
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
SEE MORE TEXTBOOKS