Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN: 9781305506381
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
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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- map/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_forwardUnder 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_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
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- 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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