Question 1

What happens to the price and quantity sold of a drug when its patent runs out?

Accepted Answer

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Question 2

A reduction in a monopolist's fixed costs would

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Question 3

If a pharmaceutical company discovers a new drug and successfully patents it, patent law gives the firm

Accepted Answer

Patent law gives the firm sole ownership of the right to sell the drug for a limited number of years, usually 20 years from the date of filing the patent application. This means that no other company can sell the same drug during this period, allowing the pharmaceutical company to recoup the costs of research and development and make a profit. After the patent expires, other companies can produce and sell generic versions of the drug, which typically drives down the price due to increased competition.

Question 4

Suppose a monopolist charges a price of $27 for its product and sells 10 units at that price. At 10 units of production the firm has average fixed cost equal to $10 and average variable cost equal to $12. How much total profit is the firm earning at this price?

Accepted Answer

To calculate the total profit, we need to first calculate the total revenue and the total cost.

Total revenue = Price x Quantity = $27 x 10 = $270

Total cost = Total fixed cost + Total variable cost
Total fixed cost = Average fixed cost x Quantity = $10 x 10 = $100
Total variable cost = Average variable cost x Quantity = $12 x 10 = $120
Total cost = $100 + $120 = $220

Total profit = Total revenue - Total cost = $270 - $220 = $50

Therefore, the firm is earning a total profit of $50 at the given price of $27 for its product. Therefore, the best choice is C.

Question 5

Which of the following statements is correct?

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The answer of Which of the following statements is correct?
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Question 6

Due to the nature of the patent laws on pharmaceuticals, the market for such drugs

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Question 7

After the patent runs out on a brand name drug, generic drugs enter the market. What happens next in the market?

Accepted Answer

When generic drugs enter the market, they create competition which leads to a decrease in the price of the drug. This decrease in price benefits consumers and increases the total surplus in the market as more people can afford to purchase the medication. Therefore, option C is the correct choice.

Question 8

Which of the following statements is not correct?

Accepted Answer

The monopolist produces where MR = MC, not P = MC. This is because a monopolist has market power and can set their price higher than their marginal cost to maximize profits.

Question 9

If a monopolist sells 100 units at $8 per unit and realizes an average total cost of $6 per unit, what is the monopolist's profit?

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Question 10

A profit-maximizing monopolist charges a price of $12. The intersection of the marginal revenue and marginal cost curves occurs where output is 10 units and marginal cost is $6. Average total cost for 10 units of output is $5. What is the monopolist's profit?

Accepted Answer

The answer of A profit-maximizing monopolist charges a price of...

Question 11

In a competitive market, a firm's supply curve dictates the amount it will supply. In a monopoly market the

Accepted Answer

In a monopoly market, the decision about how much to supply is impossible to separate from the demand curve it faces. Since the monopolist is the sole provider of the product or service, its supply decisions will depend heavily on the demand curve it faces, which is a function of the market and consumer behavior. Therefore, unlike in a competitive market where supply is solely determined by the firm's own supply curve, in a monopoly market, supply decisions are dictated by both the monopolist's production costs and the demand curve it faces.

Question 12

A monopoly's marginal cost will

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Question 13

A profit-maximizing monopolist charges a price of $14. The intersection of the marginal revenue curve and the marginal cost curve occurs where output is 15 units and marginal cost is $7. What is the monopolist's profit?

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Question 14

The supply curve for the monopolist

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Question 15

Suppose when a monopolist produces 75 units its average revenue is $10 per unit, its marginal revenue is $5 per unit, its marginal cost is $6 per unit, and its average total cost is $5 per unit. What can we conclude about this monopolist?

Accepted Answer

To maximize profits, a monopolist should produce at the point where marginal revenue equals marginal cost. In this case, the monopolist is producing 75 units when its marginal revenue is $5 per unit and its marginal cost is $6 per unit, which means it could increase its profits by reducing the number of units it produces. Additionally, since the average revenue is greater than the average total cost, the monopolist is making a profit at this level of production. Therefore, to maximize profits, the monopolist should produce fewer units and charge a higher price.

Question 16

Which of the following formulas would correctly calculate a monopolist's profit?

Accepted Answer

The formula for calculating a monopolist's profit is (price - average total cost) multiplied by quantity. This is because the monopolist sets the price for their product and produces a quantity of goods where their average total cost is equal to the price. Therefore, their profit will be the difference between the price and the average total cost multiplied by the quantity sold.

Question 17

A monopolist

Accepted Answer

A monopolist does not have a supply curve because it sets its price at the same time it chooses the quantity to supply. Its decision on quantity supplied is based on the profit-maximizing level where marginal revenue equals marginal cost, rather than being determined by a supply curve.

Question 18

Suppose when a monopolist produces 50 units its average revenue is $8 per unit, its marginal revenue is $4 per unit, its marginal cost is $4 per unit, and its average total cost is $3 per unit. What can we conclude about this monopolist?

Accepted Answer

To maximize profits, a monopolist produces where MR=MC. Here, the MR is $4, and MC is also $4. Therefore, the monopolist is maximizing profits by producing 50 units.

Total revenue at this level of output is 50 x $8 = $400. 
Total cost at this level of output is 50 x $3 = $150. 
Total profit is $400 - $150 = $250.

Question 19

Name brand drugs are able to continue capitalizing on their market power even after generic drugs enter the market because

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Question 20

Generic drugs enter the pharmaceutical drug market once

Accepted Answer

Generic drugs enter the pharmaceutical drug market once the patent on the name brand drug expires, allowing other manufacturers to produce and sell the drug using the same active ingredients. This typically happens after 20 years from the date of filing the patent, excluding any extensions granted.

Quiz 15: Monopoly