1. Explain the profit-maximizing production decision of a monopoly firm. Describe the assumptions about the market structure of monopoly, how these assumptions relate to the market power of the monopoly firm, and the condition that guarantees maximum profit.
2. Read the 2018 article "EpiPen Gets First Generic Rival After Furor Over High Price" fromBloomberg Businessweekthat is available as a PDF on Blackboard.
3. What is an EpiPen and which pharmaceutical company owns the rights to sell it? How much did the EpiPen cost before and after these rights were purchased? What characteristic do economists label the ability to change price in this way?
4. Besides pricing, what is another concern for consumers that derives from the market structure for the EpiPen?
5. What is the main threat being described in the article to the seller of the EpiPen? What might be the consequences of this threat? How has the seller of EpiPen tried to defend itself in the market?
6. How is the threat described in the article different from similar threats in the past?
7. Consider a market for laboratory equipment. Demand is given by P = 400 - Q where P is the per-unit price of the equipment and Q is the number of equipment units. The marginal cost is $50 to produce and sell the equipment.
8. What would be the equilibrium market quantity and price if this market were perfectly competitive?
9. What would be the equilibrium market quantity and price if this market were a monopoly? Verify that the monopoly will operate in the elastic portion of consumer demand.
10. Calculate and compare the profits between the PC and monopoly markets.
11. Calculate and compare consumer surplus between the PC and monopoly markets. What is the relationship between profits and consumer surplus when comparing the two market structures?