mtr_mkt_ques

mtr_mkt_ques - UNIVERSITY OF CALIFORNIA HAAS SCHOOL OF...

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UNIVERSITY OF CALIFORNIA HAAS SCHOOL OF BUSINESS EWMBA 201A—Economic Analysis for Business Decisions Fall 2007 Professor Catherine Wolfram Midterm Review Questions: Perfectly Competitive Markets [Short answer questions.] 1. Currently, chewable aspirin are recommended for adults and for children 2 and older. Assume that the market for chewable aspirin is perfectly competitive. In other words, there are many buyers and sellers who have perfect information about one another, and the costs of transacting are small for any combination of buyer and seller. The Food and Drug Administration (FDA) is considering a policy of requiring chewable aspirin for 2-6 year olds to be subject to more testing and sold under separate label. Only some of the current suppliers of chewable aspirin have the facilities to do the required tests and, under the FDA’s policy, only these suppliers will be allowed to sell to 2-6 year olds. Assume that if a supplier has testing facilities, the costs of doing the tests are
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mtr_mkt_ques - UNIVERSITY OF CALIFORNIA HAAS SCHOOL OF...

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