Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Question
Chapter 14, Problem 6DQ
To determine
The effect of a cut in price by a regulated firm that would double its profit.
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The 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?
Andrea’s Day Spa began to offer a relaxing aromatherapy treatment. The firm asks you how much to charge to maximize profits. The first two columns in the table below provide the price and quantity for the demand curve for treatments. The fifth column shows its total costs. Complete the table. What is the profit-maximizing level of output for the treatments and how much will the firm earn in profits?
Price
Quantity
Total Revenue
Marginal Revenue
Total Cost
Marginal Cost
$25
0
$0
N/A
$130
N/A
$24
10
$275
$23
20
$435
$22.50
30
$610
$22
40
$800
$21.60
50
$1005
$21.20
60
$1225
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Chapter 14 Solutions
Economics: Principles & Policy
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