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- How does monopoly effect the pharmaceutical industry?In the US, drug companies receive a patent of 100 years for each drug they develop. This allows them a prolonged legal monopoly on the sale of that drug. True FalseMonopoly and Price Elasticity Consider the relationship between monopoly pricing and the price elasticity of demand. If demand is inelastic and a monopolist raises its price, quantity would fall by a (LARGER AND SMALLER) percentage than the rise in price, causing profit to (DECREASE OR INCREASE) . Therefore, a monopolist will (ALWAYS, NEVER OR SOMETIMES) produce a quantity at which the demand curve is elastic. Use the purple segment (diamond symbols) to indicate the portion of the demand curve that is inelastic. (Hint: The answer is related to the marginal-revenue (MR) curve.) Then use the black point (plus symbol) to show the quantity and price that maximizes total revenue (TR).
- A monopoly drug producer that has a constant marginal cost of $1 sells in only two countries and faces a linear demand curve of Q1 = 12 – 2P1 in Country 1 and Q2 = 9 – P2 in Country 2. What price does it charge in each country? What quantity does it sell in each country?Consider the relationship between monopoly pricing and the price elasticity of demand. If demand is inelastic and a monopolist raises its price, quantity would fall by a percentage than the rise in price, causing profit to Therefore, a monopolist will produce a quantity at which the demand curve is elastic. Use the purple segment (diamond symbols) to indicate the portion of the demand curve that is inelastic. (Hint: The answer is related to the marginal- revenue (MR) curve.) Then use the black point (plus symbol) to show the quantity and price that maximizes total revenue (TR). (? 10 Demand Inelastic Demand 6 5 Max TR 3 2 1 -1 -2 Marginal Revenue -3 -4 1 2 3 4 5 7 8 9 10 QuantityThe price elasticity of demand for a monopolist product is-0.7. Advise the firm on its pricing strategy.
- Discuss the forms of barriers to entry in the pharmaceutical industry.Assume a monopoly firm is able to engage in perfect (or first degree) price discrimination and the demand for the monopolist's product is given by the data in the chart. This firm will sell one unit of output if it charges a price of $ . The firm can lower the price to $ to sell a second unit, which would result in total revenue equal to $ lower the price to $ The firm can to sell a third unit, which would result in total revenue equal to $ to sell a fourth unit, which would The firm can lower the price to $ result in total revenue equal to $ Price per unit $20 16 12 8 4 0 Quantity Demanded 0 1 2345The price elasticity of demand for a monopolist’s product is –0.7. Advise the firm on its pricing strategy.
- Consider the relationship between monopoly pricing and the price elasticity of demand. If demand is inelastic and a monopolist raises its price, quantity would fall by a ▼. Therefore, a monopolist will Use the purple segment (diamond symbols) to indicate the portion of the demand curve that is inelastic. (Hint: The answer is related to the marginal- revenue (MR) curve.) Then use the black point (plus symbol) to show the quantity and price that maximizes total revenue (TR). Price 10 9 CO 7 6 S E 2 0 -2 Demand Search percentage than the rise in price, causing profit to produce a quantity at which the demand curve is elastic. Marginal Revenue 86 Inelastic Demand e + Max TR C ? (CC Speaker/Headph AA monopolist is producing an output and charging a price that maximizes its profit when it is unexpectedly confronted with an increase in its fixed costs. In response, a profit-maximizing monopolist will: Raise price to recover a portion of the higher fixed cost Continue to produce the same level of output and make no price change Lower price to ell enough units to cover the higher fixed cost Either raise or lower price depending on the price elasticity of demand.A monopolist is currently selling 400 units of output at a price of $20 per unit. The elasticity of demand is € = 2 (negative number). Would this firm wish to sell an additional unit for $19.50 if it could do so without cutting the price charged for the first 400 units sold? Would a perfect competitor ever wish to sell an additional unit at a lower price? Why or why not.