Question

4) The table below represents the demand curve for a cancer treatment drug in the fictional country of Frobia, Frobia is a small, low-income country with no public health care system. Few people are covered by insurance. The price is for a bottle that contains a one-month supply of the drug Assume that one drug company, BigPharma, has a patent on this drug, and there are no close substitutes. Big Pharma is the sole legal provider of this drug in Frobia. Use this information to answer the following questions. Quantity Price Revenue Marginal Demanded Revenue S500 21 $400 $300 4 $240 $200 $150 $100 $60 $28 10 $2 a) Complete the information about revenue and marginal revenue in the table above. bl If BigPhamma has a constant marginal cost of production of $20 per bottle, how many will they sell and what price will they charge? e) From the information given, can you tell if they are making a positive profit at your choice of P and Q in part b)? Why or why not? d) Now imagine this was a perfectly competitive market with many suppliers of a generic version of the drug. The fallowing table gives the market supply Guantity Supplied Price $20 $20 $20 4 $20 $20 $20

Answer 1

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