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Details: If patents permit firms to set P>MC (P might be ten times MC or in extreme cases even 100xMC), this implies very large ?gross margins?- in accounting terms the spread between sales revenues and the cost of goods sold, before allowances for contributions to fixed costs and other costs not directly related to production. What incentives and capabilities (consider both) does this large gross margin create of advertising? Is it then surprising that drug that drug companies?strictly for profit firms?spend about twice as much for advertising (primarily to physicians) as they do for research? (They do not advertise this fact.) Thus consider the link between patent protection and the scale of advertising budgets. How might one think about the private and social costs, the opportunity costs of resources used in advertising, relative to their benefits? Could patent protect provide resources and incentives to support the transfer of information to prescribers about new therapeutic possibilities (a social benefit)? Or might it be a way of buying ?inappropriate prescribing? to the benefit of drug marketers (a private benefit, and social cost)? How might one tell?
Patents operate powerfully to encourage innovation. But can there be too much innovation? Explain, again considering the difference between the private and the social benefits from innovation. What considerations would guide a profit-maximizing firm in deciding how to allocate its research budget? )Go a little deeper than ?Where it thinks it can get the largest profit?!) What considerations might the general public, you or
I, want to have determining research priorities?
Explain the concept of externality. What does it have to do with the efficient allocation of resources?
Illustrate what yield curve shape is depicted if intermediate term tresury securities yield
Jim is considering quitting his work and utilizing his savings to start a small business. He expects that his costs will consist of a lease on the building, inventory, wages for two workers, electricity and insurance.
Answer the following questions on the basis of the monopolist's situation illustrated in the following graph.
What is the cost of producing additional car when 50 cars are being produced? What is the cost of producing additional care when 150 cars are being produced?
Suppose if the table shows the demand faced by a monopoly firm then what is that firms marginal revenues
Complete the following table by computing the marginal utility per dollar for successive units of X, Y, and Z to one or two decimal places.
Fiscal policy refers to the use of government expenditures or tax policy to influence the aggregate demand for a specific purpose.
Between your answers to parts b and c, which prices/capacity are best applied from a social welfare perspective? Why?
For an unknown reason, aliens kidnapped all immigrants residing in the US. One morning America wakes up and finds that the only people left in the country are American citizens, while all legal and illegal immigrants are gone.
What takes palce to output, the optimal scale of a firm, and price if there is a free entry into the market.
Graph the accompanying demand data, and then use the midpoint formula for E d to determine price elasticity of demand for each of the four possible $1 price changes.
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