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Excel File Edit View Insert Format Tools Data Window Help 25% Tue 8:16:18 AM Q DE AutoSave OFF health_PS3 (3) Home Insert Draw Page Layout Formulas Data Review View ? Tell me Share Comments x Office Update To keep up-to-date with security updates, fixes, and improvements, choose Check for Updates. Check for Updates R3 + X V fx A C D E G H J K L M N P Q R S T U v w AWN - Price Controls: Monopolist Pharmaceutical Firm The table below provides information (columns A and B) on the monthly demand for a new drug produced by a pharmaceutical firm, the only maker of a drug that can actually slow the progression of Parkinson's Disease, which afflicts about 1.5 million people in the United States. Assume the total fixed cost of bringing the drug to market, including research and development, is $800 mllion (i.e. $800,000,000) while the variable (i.e. marketing) cost of the drug is $288 per one-month prescription. In addition, assume that health insurance does not cover the cost of the drug (i.e. consumers pay the full market price). Use this information in the problem, which consists of two parts: PART 1: Complete the table, entering formulas for total revenue, total cost, average total cost, marginal cost, and marginal revenue. PART 2: Answer the questions below the table. Monthly Demand Schedule and Cost for Monopolist Pharmaceutical Firm: Quantity Demanded Price (Monthly (for one-month Prescriptions) [prescription) Total Revenue Total cost Average Total Cost Marginal Cost Marginal Revenue $3,600 60,000 $3,456 20,000 $3,312 80,000 $3, 168 240,000 $3,024 300,000 $2, 880 360,000 $2,736 420,000 $2,592 480,000 $2,448 540,000 $2, 304 00,000 2,160 660,000 $2,016 720,000 $1,872 780,000 $1,728 $40,000 $1,584 900,000 $1,440 960,000 $1,296 1,020,000 $1, 152 1,080,000 $1,008 1,140,000 $864 ,200,000 $720 1,260,000 $57 1,320,000 $432 ,380,000 $288 1,440,000 $144 1,500,000 $0 HC Labor Choice Supply-Induced Demand LR vs. SR Decisions Measuring Market Power Price Controls + Ready - 7070 downla NOV 24 P X W 25PVCNExcel File Edit View Insert Format Tools Data Window Help 25% Tue 8:16:26 AM Q DE AutoSave OFF health_PS3 (3) Home Insert Draw Page Layout Formulas Data Review View ? Tell me Share Comments x Office Update To keep up-to-date with security updates, fixes, and improvements, choose Check for Updates. Check for Updates R3 X V fx A C D F G H J K L M 0 P Q R S T U v w 2 Questions for Part 2: 53 1. Profit-Maximizing Outcome 54 65 1a. Using figures in the table, what is the firm's profit-maximizing quantity and price? Profit-Maximizing Quantity: 57 Profit-Maximizing Price 1b. At that quantity and price, what is the firm's profit? NOTE: Use figures in the table. Profit: 62 64 65 2 2. Allocationy-Efficient Outcome 66 67 2a. Using figures in the table, what would be the allocationy-efficient (i.e. perfectly competitive) quantity and price in this market? Allocatingly-Efficient Quantity: Allocationy-Efficient Price: 70 2b. Is the allocationy-efficient outcome feasible for the firm? Briefly explain. 80 3. Calculate the amount of deadweight loss in this market due to the firm's monpoly power. Note: Enter a formula to calculate the deadweight loss referencing cells (either in the table or in the questions) above. 8 4. Regulation: Suppose the government considers a policy that would have it regulate the monthly prescription price of this drug. 89 4a. Using figures in the table, indicate the lowest price the government could set for a monthly prescription that would still allow the firm to make at least a normal profit? Policy Price: 91 HC Labor Choice Supply-Induced Demand LR vs. SR Decisions Measuring Market Power Price Controls + Ready + 75% downl NOV 24 P X W 25PVCNExcel File Edit View Insert Format Tools Data Window Help 25% Tue 8:16:28 AM Q DE AutoSave OFF health_PS3 (3) ~ Home Insert Draw Page Layout Formulas Data Review View ? Tell me Share Comments * Office Update To keep up-to-date with security updates, fixes, and improvements, choose Check for Updates. Check for Updates R3 4 X V fx C D G H K L M N o P Q R S U w -..... 3. Calculate the amount of deadweight loss in this market due to the firm's monpoly power. 31 Note: Enter a formula to calculate the deadweight loss referencing cells (either in the table or in the questions) above. 4. Regulation: Suppose the government considers a policy that would have it regulate the monthly prescription price of this drug. 89 4a. Using figures in the table, indicate the lowest price the government could set for a monthly prescription that would still allow the firm to make at least a normal profit? Policy Price: 91 92 93 4b. At that price, how many monthly prescriptions would be filled? Monthly Prescriptions under Policy: 8 8 8 4c. How much deadweight loss (DWL) would there be under this policy? Note: Enter a formula to calculate the deadweight loss under the policy by referencing cells (either in the table or questions) above. DWL under Policy: HC Labor Choice Supply-Induced Demand LR vs. SR Decisions Measuring Market Power Price Controls + Ready - downla NOV 24 P X W 25PVCN
