Question 6 [A new drug called 'LowG', taken together with any food, reduces the glycemic index (a measure of the impact of the food on blood sugar) by 50%. Annual demand for this new medication can be described by the following table:] Quantity (millions of milligrams) 0 200 400 600 800 1000 1200 1400 1600 1800 2000 Price ($) 1000 900 800 700 600 500 400 300 200 100
Question 6 [A new drug called 'LowG', taken together with any food, reduces the glycemic index (a measure of the impact of the food on blood sugar) by 50%. Annual demand for this new medication can be described by the following table:] Quantity (millions of milligrams) 0 200 400 600 800 1000 1200 1400 1600 1800 2000 Price ($) 1000 900 800 700 600 500 400 300 200 100
Chapter5: Elasticity Of Demand And Supply
Section: Chapter Questions
Problem 2.5P: (Determinants of Price Elasticity) Would the price elasticity of demand for electricity be more...
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Question
![b) [Suppose for Rache, production of this drug involves an annual fixed cost of
$200,000 and a (constant) marginal cost of $300 per million milligrams of the
drug. Find the profit maximizing quantity produced and the price for Rache.
Show how you calculated this equilibrium and demonstrate it graphically.]
Correct and clearly labelled graph accompanied by correct identification of profit maximising price
and quantity.
c) [Suppose that the cost of seeking a patent is equal to $0.5 million, and that a
patent lasts for 15 years. Is it worthwhile for Rache to seek a patent to
produce this medication, if it knows its costs and the demand information (as
provided above) beforehand? Assume constant macroeconomic conditions for
the next 15 years for simplicity. Explain your answer. ] Correctly identified response.
Logical and correct explanation within word-limit.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1142add5-91c5-4a27-aa8c-f5851236ec6a%2F327b2128-c7b2-4b72-ae88-e40a74e6ad8b%2F1idfgwi_processed.png&w=3840&q=75)
Transcribed Image Text:b) [Suppose for Rache, production of this drug involves an annual fixed cost of
$200,000 and a (constant) marginal cost of $300 per million milligrams of the
drug. Find the profit maximizing quantity produced and the price for Rache.
Show how you calculated this equilibrium and demonstrate it graphically.]
Correct and clearly labelled graph accompanied by correct identification of profit maximising price
and quantity.
c) [Suppose that the cost of seeking a patent is equal to $0.5 million, and that a
patent lasts for 15 years. Is it worthwhile for Rache to seek a patent to
produce this medication, if it knows its costs and the demand information (as
provided above) beforehand? Assume constant macroeconomic conditions for
the next 15 years for simplicity. Explain your answer. ] Correctly identified response.
Logical and correct explanation within word-limit.
![Question 6
[A new drug called 'LowG', taken together with any food, reduces the glycemic index
(a measure of the impact of the food on blood sugar) by 50%. Annual demand for this
new medication can be described by the following table:]
Quantity (millions of
milligrams)
0
200
400
600
800
1000
1200
1400
1600
1800
2000
Price ($)
1000
900
800
700
600
500
400
300
200
100
0
a) [Rache, a pharmaceutical company, holds the patent on LowG and therefore
is the only legal producer of the drug for the next 15 years. Calculate total
revenue (TR) and marginal revenue (MR) for Rache at each price. Both Total
Revenue (TR) and Marginal Revenue (MR) correctly calculated.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1142add5-91c5-4a27-aa8c-f5851236ec6a%2F327b2128-c7b2-4b72-ae88-e40a74e6ad8b%2Fb3d72p_processed.png&w=3840&q=75)
Transcribed Image Text:Question 6
[A new drug called 'LowG', taken together with any food, reduces the glycemic index
(a measure of the impact of the food on blood sugar) by 50%. Annual demand for this
new medication can be described by the following table:]
Quantity (millions of
milligrams)
0
200
400
600
800
1000
1200
1400
1600
1800
2000
Price ($)
1000
900
800
700
600
500
400
300
200
100
0
a) [Rache, a pharmaceutical company, holds the patent on LowG and therefore
is the only legal producer of the drug for the next 15 years. Calculate total
revenue (TR) and marginal revenue (MR) for Rache at each price. Both Total
Revenue (TR) and Marginal Revenue (MR) correctly calculated.
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