Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Question
Chapter 12, Problem 6Q
To determine
The reason for the producer not opting to charge a high price for life-saving drugs.
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Students have asked these similar questions
what are pricing tactics and examples? What are some forms of price discriminations?
Your task is to show what the profit of this firm might look like using a key economics diagram.
To make graphing easier, we will consider the price of the Ozempic drug for the middle-income
country Bangladesh, which is $38 (assumed the profit-maximising price).
For this task, you will be required to illustrate and explain to a typical first-year undergrad student
who has no economics background the profit the firm makes at $38 per month, and what has
happened to profit (producer surplus), markup, consumer surplus and the output if the price was
reduced from $38 to $10 per month.
What is the optimal price to charge?
Chapter 12 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
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Similar questions
- Why would a healthcare manager ever want to price discriminate?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_forwardName-Brand Prescription Drugs Market—“Happy Pill”—that greatly improves life but is not essential to life. Using supply and demand analysis, explain what happens to the market price and quantity of a name-brand prescription drug Happy Pill if its patent expires. Using supply and demand analysis explain why Happy Pill might be advertised. Using supply and demand analysis, explain what would happen to the price and quantity of Happy Pills if there was a severe recession, and people lost their jobs, which included a health-care benefit that payed for prescription drugs.arrow_forward
- Suppose that a new restaurant entry increased consumer elasticity of demand for the sushi appetizer from 2 to 3. The price you charge initially is $10. By how much will you have to adjust the price? Will you still be able to make profit?arrow_forwardWhy does it not charge a price below the market price?arrow_forwardThe New York Times has stated that Mylan, the company that makes the now infamous Epipen, has become “the poster boy for out of control drug prices.” Why did this Pittsburgh-based company raise prices so much that Americans pay three times as much as Canadians for the same drug? Do you think patents are good for society?arrow_forward
- How does monopoly effect the pharmaceutical industry?arrow_forwardU.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.arrow_forwardHow does price discrimination help customers?arrow_forward
- 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 re-importation of drugs to the United States.arrow_forwardSuppose there exists a costless way to charge drivers on the freeway. Under this costless system, tolls on the freeway would be adjusted according to traffic conditions. For example, when traffic is usually heavy, as it is from 6:30 a.m. to 9:00 a.m. on a weekday, the toll to drive on the freeway would be higher than when traffic is light. In other words, freeway tolls would be used to equate the demand for freeway space with its supply. Would you be in favor of such a system to replace our current (largely zero price) system? Explain your answer.arrow_forwardSuppose the inverse demand curve for drugs is p(q) = 200 - 4q and the inverse supply curve is p(q) = q. Draw the supply and demand curves on the graph below. Label the current price and quantity, label and calculate the current producer and consumer surplus, and calculate and label the total revenue accumulating to suppliers in this market.arrow_forward
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