View the step-by-step solution to:

2.3 Assume the US demand for a pharmaceutical designed for treating people for lifethreatening heart-worms is known to be: Q=100 - 10 P, where P is

could you please figure out question 2.5 ?
i put 2.3 for 2.5
it's reference for 2.5
please please

2.3 Assume the US demand for a pharmaceutical designed for treating people for life- threatening heart-worms is known to be: Q=100 – 10 P, where P is price. The cost of producing the drug is $2.00 per treatment. The producer has a patent on the drug in every country. How much does the producer charge for the drug? Draw a sketch showing the determination of the profit-maximizing price? Answer) Given demand function is Q = 100 –10P or P = 10 - 0.1Q, To find how much producer shall charge for the drug we will find the profit maximizing unit of output, as the producer has a patent on the drug in every industry he is monopolist At profit maximizing unit of output, MR = MC, Therefore, we have TR = P*Q = 10Q – 0.1Q 2 MR = D(TR)/DQ = 10 – 0.2Q so at MR = MC 10- 0.2Q = 2 Q = 40 and P = 10 – 40*0.1 = 6 Therefore, producer should charge $6 per unit of output. 2.5 Before the drug is marketed, consumers in the US announce that they are willing to subsidize fully the extra cost the firm incurs from production of any extra units, sold for treating people not dogs sold in the US above the quantity initially planned in 2.3 above, as well as all the 100 units given to the 100 Africans who need it. (The company must sell all US units at one price, no US price discrimination.) How much must US consumers value the treatment of the Africans to make this deal worthwhile for the US consumers? Answer carefully. (5 points)
Background image of page 1
Sign up to view the entire interaction

Top Answer

Please find... View the full answer

8414145.doc

2.3 Assume the US demand for a pharmaceutical designed for treating people for lifethreatening heart-worms is known to be: Q=100 – 10 P, where P is price. The cost of
producing the drug is $2.00...

Sign up to view the full answer

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question
Ask a homework question - tutors are online