Bundle: Managerial Economics: Applications, Strategies And Tactics, 14th + Mindtap Economics, 1 Term (6 Months) Printed Access Card
14th Edition
ISBN: 9781337198196
Author: James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher: Cengage Learning
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Chapter 11, Problem 2.3CE
To determine
To describe: The Hatch-Waxman act need justification in replacing the exclusivity with another.
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Exhibit 12.4 The Market Demand Curve for Claritin
Price $8
With patent protection from the government, the demand curve
that Schering-Plough faces for its sales of Claritin is the entire
market. For example, if Schering-Plough chose a price of $4,
then it would be able to sell 400 million units, but the demand
curve shows that if it chose a price of $6 or higher, it wouldn't
sell any Claritin, despite having a monopoly.
7
4
3
2
DClaritin
1
Let's assume/lestimate:
What would the market
100 200 300 400 500 600 700 800
price and the quantity be
under perfect competition?
Demand: p=7-x/150
Quantity (in millions of pills)
Cost = 1*x
%3D
And what for the
Marginal Cost c'=1
monopoly?
Assume the first year demand curve for a new drug Livehappy is given by Q=2000-P, where P is the price
that the monopolistic firm charges in order to maximize its profit given by profit P*Q. Given the linear
demand function, we know that the price would be given by setting the Marginal revenue 2000-2P =
Marginal cost. Assume that the cost of producing Livehappy is negligible and approximated to 0. What is
the maximum profit generated by the company during the first year?
A Moving to the next question prevents changes to this answer.
Question 27 of 29
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One advantage of the use of patents over the use of subsidies and prizes is that patents:
can be used to inspire solutions to specific problems.
allow for ideas to spread more quickly once created.
create incentives for more good ideas.
are only profitable when consumers value the new idea.
Chapter 11 Solutions
Bundle: Managerial Economics: Applications, Strategies And Tactics, 14th + Mindtap Economics, 1 Term (6 Months) Printed Access Card
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- Under which circumstances is patent protection most necessary? Where information about technological improvements disseminates slowly Where information about technological improvements disseminates rapidly In a market with few sellers Where the cost of research and development is very lowarrow_forwardmap/ihdex.html?_con=con&external_browser%3D0&launchUrl=https%253A%252F%252Fnewconnect.m.. Because of their unique expertise with explosives, the Zambino brothers have long enjoyed a monopoly of the European market for public fireworks displays for crowds above a quarter of a million. The annual demand for these fireworks displays is P= 160 - 1Q. The marginal cost of putting on a fireworks display is 55. A family dispute broke the firm in two. Alfredo Zambino now runs one firm and Luigi Zambino runs the other. They still have the same marginal costs, but now they are Cournot duopolists. How much profit has the family lost? (Round your answer to 2 decimal places (e.g., 32.16). Negative answer should be indicated by a minus sign.) 00:24 P Type here to search 14/02/2022 acerarrow_forwardDr. Krieger is the only bionic arm specialist on the remote pacific island of Pangu. Because he is the only specialist, and because of the island's remoteness, Dr Krieger operates as a profit maximising monopolist. His marginal cost of production for each bionic arm is $5000 per arm. Below is a table of potential prices he could charge for each bionic arm that he fits, and the corresponding quantities sold in a given year. Price ($/bionic arm) 15000 13000 11000 9000 7000 5000 Quantity (bionic arms) 10 15 20 25 30 35 What is Dr. Krieger's profit-maximising quantity? Answer to the nearest whole number of bionic arms (with no decimal places).arrow_forward
- Mighty Cleaners, Inc, is a monopolist in the specialised cleaning industry. Its cost is C = 220 - 4Q + Q2 and demand is P = 180 - 3Q, where Q is the number of hours of cleaning they provide and P is the price per hour of cleaning they charge. Find the optimal price P and output Q. What would be its profit? Please round your final answers to two decimal places, if necessary. For example, type in 12.5 for quantity, 2.34 for price and 300.78 for profit. • the optimal output (the number of hours of cleaning) is 45 hours. • the optimal price is $ 45 • the profit is 0arrow_forwardhe Pear Computer Company just developed a totally revolutionary new personal computer. Pear estimates that it will take competitors at least two years to produce equivalent products. The demand function for the computer is estimated to be P=2,500−500Q�=2,500−500� where Q� is millions of computers. The marginal (and average variable) cost of producing the computer is $900. Assuming Pear acts as a monopolist in its market, the profit-maximizing price and output levels are per computer and million computers, respectively. The total contribution to profits and fixed costs at this output level is million. Pear Computer is considering an alternative pricing strategy of price skimming. It plans to set the following schedule of prices over the coming two years: Complete the following table by calculating the contribution to profit and overhead for each of the 10 time periods and prices. Time Period Price Quantity Sold Total Contribution ($) (Million)…arrow_forwardThe supply chain for Pappy Van Winkle bourbon is characterized by a monopolist upstream producer and a competitive downstream retail sector. Final consumers’ demand for Pappy Van Winkle bourbon is given as: P=140-2Q, where Q is the number of bottles that are purchased each day. The marginal cost of production (i.e., performing the manufacturing function) can be written as: MCM=30+2Q, and the marginal cost of performing the retail function is MCA=20. Suppose that the two firms are not vertically integrated. Construct the final consumers’ demand curve.arrow_forward
- A pharmaceutical company with a patented drug faces demand curves of Qus =250,000-5,000Pus and QCA =150,000-4,000PCA- Suppose international drug sales are illegal and the marginal cost is 2. What will the company charge Canadian consumers and how much will be demanded? Would a law to make international sales legal help US consumers? What about Canadian consumers? Would the firm holding the patient oppose th law? (no calculations are needed in the last three questions)arrow_forwardQUESTION 2: WORD LIMIT – MAXIMUM 500 WORDS Using the Monopoly model, show using diagrams how a monopolist may sustain abnormal profits for the indefinite future. Should the competition commission litigate against firms who have a dominant market position? In your answer, make sure you use a diagram, list the assumptions for the model, and give examples of real world markets that may be dominated by monopolists. The diagram used should be your own and not taken from another source. (arrow_forwardWORD LIMIT – MAXIMUM 500 WORDS Using the Monopoly model, show using diagrams how a monopolist may sustain abnormal profits for the indefinite future. Should the competition commission litigate against firms who have a dominant market position? In your answer, make sure you use a diagram, list the assumptions for the model, and give examples of real world markets that may be dominated by monopolists. The diagram used should be your own and not taken from another source.arrow_forward
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