figures 5.8 and 5.16 provided. everything is provided so there should be no excuse to not answer it. the previous 2 'experts' are dumb and couldn't provide me with an answer 5.22. Monsanto's Roundup™. Roundup, the trademarked nameof glyphosate, a chemical herbicide developed and patented in the1970s, was Monsanto's leading product for decades. In the late 1990s,it became the best-selling agricultural chemical of all time and anenormously profitable product for the company. Glyphosate-basedherbicides produced net sales for Monsanto of $2.4b in 2001 alone,nearly half the Mosanto's total.5.3. OUTPUT LEVEL AND PRICE212This success was the result of several factors. One was a con-scious strategy to reduce price in the US, where patent protectiongave Monsanto an effective monopoly until September 2000. (Priceswere lower outside the US, where patents expired earlier.) Between1995 and 2000, Monsanto reduced the price by an average of 9% ayear. When volume increased by an average of 22% a year, revenueand profits exploded. Table 5.8 displays the values of prices and unitsales, both in the US and overseas. Figure 5.16 plots the various timeseries.Another factor in Roundup's success was the increasing popu-larity of conservation tillage, an environmentally friendly method offarming in which crops are planted without first plowing the fields.With less plowing, there is less loss of topsoil and moisture. Theproblem is weeds. Instead of plowing them under, farmers eliminateweeds before planting by applying a nonselective herbicide such asRoundup. Analysts suggest that conservation tillage is sensitive tothe price of herbicides, an important component of its cost.A third factor was the development of herbicide-tolerant crops.Monsanto's Roundup Ready corn was approved in 1998, and soy-beans followed shortly thereafter. Monsanto argued that Roundupand Roundup Ready seeds were complementary products, withprice reductions in one increasing demand for the other.Even as patents expired, Monsanto was able to maintain highmarket shares. In Brazil, for example, Monsanto's patent expired in1981, yet its 2001 market share was 81%. High market share, in turn,allowed Monsanto to exploit economies of scale and work its waydown the learning curve. 5040302010806040Price ($ per gallon)1995 1996 1997 1998 1999 2000 2001 2002Sales (millions of gallons)USoverseas20USoverseasYearFIGURE 5.16Roundup's price and sales (US and overseas)Year1995 1996 1997 1998 1999 2000 2001 2002intro micro v 1.3.25.3. OUTPUT LEVEL AND PRICEYear(a) Provide an estimate of the US price elasticity of demandfor Roundup. Be clear about the assumptions yourestimate is based upon.(b) Based on your estimate of the price elasticity of demand,do you think Monsanto's price decrease caused anincrease in Monsanto's profits? (Hint: recall that profitequals revenue (i.e., p × q) minus cost. You will have tomake an assumption regarding the value of unit cost.)TABLE 5.8Roundup's price and sales (US and overseas)Price ($ per gallon)US4544403533282523OverseasQuantity (millions of gallons)USOverseas1316202833404539199521199620199718199816199915200014200115200214Source: Bear Stearns proprietary data, with thanks to Frank Mitsch.Done2530405464737255A(c) Monsanto has been selling Roundup for decades. If theprice decrease did indeed cause an increase in profits,why didn't Monsanto do it before the mid-late 1990s?213D

Elasticity of demand is a measure of how responsive the quantity demanded of a good or service is to…

(a) Provide an estimate of the US price elasticity of demand for Roundup. Be clear about the assumptions your estimate is based upon. (b) Based on your estimate of the price elasticity of demand, do you think Monsanto's price decrease caused an increase in Monsanto's profits? (Hint: recall that profit equals revenue (i.e., px q) minus cost. You will have to make an assumption regarding the value of unit cost.)

(a) Provide an estimate of the US price elasticity of demand for Roundup. Be clear about the assumptions your estimate is based upon. (b) Based on your estimate of the price elasticity of demand, do you think Monsanto's price decrease caused an increase in Monsanto's profits? (Hint: recall that profit equals revenue (i.e., px q) minus cost. You will have to make an assumption regarding the value of unit cost.)

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter24: Price-searcher Markets With High Entry Barriers

Section: Chapter Questions

Problem 13CQ

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