Concept of monopoly and profit maximization

Assignment Help Macroeconomics
Reference no: EM1311255

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.)

 

Reference no: EM1311255

Questions Cloud

Calculate the direction, magnitude and line of action : Calculate the direction, magnitude and line of action of the vertical and horizontal components of hydrostatic force acting on a surface.
The impact of culture differences on the global mark : The Impact of Culture Differences on the Global Mark. Write about “The Impact of Culture Differences on the Global Market”.
Converting energy from one form to another : Describe two different energy alternatives to fossil fuels in detail. Discuss how they work, how they compare with fossil fuels, and their relative advantages and disadvantages.
Probability distribution and cumulative probability : Find out the probability distribution, and the cumulative probability distribution of car arrivals.
Concept of monopoly and profit maximization : Draw marginal revenue function for this firm. What is the profit-maximizing price for this firm? On the graph describe the area, this represents the net loss to society resulting from the monopoly power conferred by the patent.
Determine the costs per equivalent unit for may : Finding  the equivalent units for materials and conversion - Determine the costs per equivalent unit for May?
Hotel check-ins for a given period : Given the following data on hotel check-ins for a 6-month period:
Computaion of yield to maturity on bond : Computaion of yield to maturity on bond and Calculate the annual return if you sell the bond at that time
Calculating total revenue-total cost and profit : Compute the total revenue and total economic profit at each level of output. Compute the pizza shop's marginal costs and marginal revenue level of output. What is the profit maximizing rate of output for pizza shop?

Reviews

Write a Review

 

Macroeconomics Questions & Answers

  Intermediate macroeconomics

Use the IS/LM model and the IS-PC-MR model to explain what monetary policy to pursue.

  Vulnerability analysis

Vulnerability Analysis

  Pricing decisisons are interrelated in oligopoly

Why is it not surprising to find that in an oligopoly which sells a basically undifferentiated product like chicken growth hormone all the firms change prices simultaneously, even if there is no explicit price fixing?

  How income may change savings behavior

How income may change savings behavior

  Discussion-non price competition

Explain how advertising can be employed to allow Tots-R-Us to keep price average above cost without encouraging entry.

  Understanding international macro economy

The questions posed are broad and open ended so be careful to allow yourself enough research and planning time.

  Describe unemployment and the unemployment rate

Describe unemployment and the unemployment rate. Might we be able to say "Job Stats: Too Good to be True?"

  Profit maximizing price output and social welfare effects

Using the Lerner index, find the price elasticity of demand for Botox and interpret what this value means to total revenue if the price of Botox were increased one percentage point.

  Calculating total revenue-total cost and profit

Compute the total revenue and total economic profit at each level of output. Compute the pizza shop's marginal costs and marginal revenue level of output. What is the profit maximizing rate of output for pizza shop?

  Economic statements about purely competitive firms

Assume that a price support system for cotton requires the federal government to pay farmers $3,000 for each acre to not plant cotton. How would you shift either the supply or demand curve for cotton to describe the effect of this action? In your a..

  Evaluation of profitable investment

If you can borrow (and lend) money at an interest rate of 8 percent, will the investment be a profitable undertaking? Is the project profitable at an interest rate of 12 per cent? Provide numerical calculations in support of your answers.

  In using the taylor rule

In using the Taylor Rule as a guideline for monetary policy, what are the pros and cons of using forecasted values of inflation and output rather than observed values of these variables?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd