Answer the following questions.
a. A monopoly is considering spending fixed costs of $100,000 to develop in period 1 a new drug that will be sold in period 2. The demand curve in period 2 is Q = 100 - P, where Q is measured in hundreds of pills and P is the price per pill, and marginal cost is constant at $4. The drug will be granted patent protection in period 2, and there are no fixed costs of production in period 2. Will the monopoly spend $100,000 developing the drug during period 1 to sell it during period 2? If it does, what is the level of consumer surplus in period 2?
b. A monopoly is considering spending fixed costs of $100,000 to develop a new drug in period 1 that will be sold in period 2. The demand curve in period 2 is Q = 100 - P, where Q is measured in hundreds of pills and P is the price per pill, and marginal cost is constant at $4. The price of the drug will be regulated, set equal to marginal cost, in period 2, and there are no fixed costs of production in period 2. Will the monopoly spend $100,000 developing the drug in period 1 to sell it in period 2 at marginal cost? If it does, what is the level of consumer surplus in period 2?

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The Answer of Answer the following questions.
a. A monopoly is considering spending fixed costs of $100,000 to develop in period 1 a new drug that will be sold in period 2. The demand curve in period 2 is Q = 100 - P, where Q is measured in hundreds of pills and P is the price per pill, and marginal cost is constant at $4. The drug will be granted patent protection in period 2, and there are no fixed costs of production in period 2. Will the monopoly spend $100,000 developing the drug during period 1 to sell it during period 2? If it does, what is the level of consumer surplus in period 2?
b. A monopoly is considering spending fixed costs of $100,000 to develop a new drug in period 1 that will be sold in period 2. The demand curve in period 2 is Q = 100 - P, where Q is measured in hundreds of pills and P is the price per pill, and marginal cost is constant at $4. The price of the drug will be regulated, set equal to marginal cost, in period 2, and there are no fixed costs of production in period 2. Will the monopoly spend $100,000 developing the drug in period 1 to sell it in period 2 at marginal cost? If it does, what is the level of consumer surplus in period 2?

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