Chapter 13, Problem 17P

To determine

a.

The consumer and producer surplus when marginal cost is constant at $100 per pack of epinephrine auto injectors.

Introduction: Producer surplus refer to the excess of benefit over the normal profit that the producers gain the market place. It is calculated by the difference of the price of good the producer sell at and the lowest price at which the producer could sell the good.

Consumer surplus refers to the benefit that the consumer gets from the purchase the goods from the market. It is calculated by the difference between the price at which the consumer purchases the goods from the market and the highest price consumer could pay to purchase the same product.

To determine

b.

The change in consumer and producer surplus if entry of Teva is restricted.

To determine

c.

The offer of saving card as a form of price discrimination and examine its effect on the consumer as well as the producer surplus.