EBK PRINCIPLES OF MICROECONOMICS (SECON
2nd Edition
ISBN: 9780393616149
Author: Mateer
Publisher: W.W.NORTON+CO. (CC)
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Chapter 11, Problem 5SP
To determine
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Suppose the inverse demand curve for drugs is p(q) = 200 - 4q and the inverse supply curve is p(q) = q. Draw the supply
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Suppose you can separate consumers into
two groups: Group 1 has a price elasticity of
demand = -3 and group 2 has a price
elasticity of demand of -9. If you could
conduct third-degree price discrimination,
which group would you charge a higher
price to? Why? What would be the relative
price of group 1 to group 2? Suppose that
the profit-maximizing price for group 2 is
$12. What price should I charge group 1?
Show all your work.
U.S. pharmaceutical companies charge different prices for prescription drugs to buyers in different nations, depending on elasticity of demand and government-imposed price ceilings. Explain why these companies, for profit reasons, oppose laws allowing reimportation of their drugs back into the United States.
Chapter 11 Solutions
EBK PRINCIPLES OF MICROECONOMICS (SECON
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- Why would a healthcare manager ever want to price discriminate?arrow_forward3.4. EZjoint. After spending 10 years and $1.5 billion, you have finally gotten Food and Drug Administration (FDA) approval to sell your new patented wonder drug, which reduces the aches and pains associated with aging joints. You will market this drug under the brand name of EZjoint. Market research indicates that the demand elasticity for EZjoint is 21.25 (at all points on the demand curve). You estimate the marginal cost of manufacturing and selling one more dose of EZjoint is $1. (a) What is the profit-maximizing price per dose of EZjoint? (b) WouldyouexpecttheelasticityofdemandyoufaceforEZjointtoriseorfall when your patent expires? Suppose that, after patent expiry, a generic version of EZjoint was introduced in the market (under the chemical name clorophospartane). Reacting to entry, EZjoint decided to increase price. (c) Can this behavior be consistent with rational profit maximizing? (Cabral, 20170224)arrow_forwardPrice discrimination is one of the major issues around the world and it will remain for coming years as well. the incentives towards price discrimination and the ability to price discrimination will be growing in the coming years as sellers will be increasingly tempted to engage in differential pricing. according to price discrimination theory, prices are expected to vary in response to differences in demand in different markets (third-degree price discrimination) or charges different price for different quantity of product (second-degree price discrimination). sellers are always tracking every moments of their customers to best fit their needs or to attract them to their products in the form of loyalty card, coupons, store credit card and many other forms incentives. price discrimination is, harmful to society when it leads to a misdistribution of resources meanwhile employment and income are not maximised. price discrimination is, however, also beneficial to society for it helps in…arrow_forward
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- Amazon Discrimination In September 2000, Amazon offered a Planet of the Apes DVD to customers using a Netscape Web browser for $64.99. Several seconds later, however, a similar search performed with Microsoft’s Internet Explorer browser resulted in a price of $74.99 for the same product. Why? Price Discrimination Describe a price discrimination opportunity your company faces—direct, indirect, or bundling. Tell your company how best to implement the scheme, and compute the profit consequences of implementing the scheme.arrow_forwardSuppose the firm has the following information on the willingness and ability of senior citizens to pay for the all-you- can-eat buffet. Market for All-You-Can-Eat c. How many meals will the restaurant sell to senior citizens if it charges the profit - maximizing price determined in part a? meals d. Suppose the firm has the ability to price discriminate. What is the profit-maximizing level of output and price? The firm should charge senior citizens $ and will sell meals. e. What is the profit generated from the sale of senior citizen meals? What will be the total profit for the firm, assuming the firm can price discriminate between average consumers and senior citizens? $ is the profit generated from senior citizens. is the total profit generated from all sales.arrow_forwardBased on the demand curve you showed in question 2 above, what is the minimum and maximum price you can charge for your product? This does not mean that you will, in fact, charge the minimum or maximum price. It simply gives you an idea of the range of prices your demand curve allows you to charge. What are the quantities corresponding to the minimum and maximum price? Please show your work and explain how you calculated these prices and quantities. The demand curve I showed in question 2: P-16-4Qarrow_forward
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