If Mylan continues to charge $150 per EpiPen, Mylan will earn economic profit. True or False: Given the demand curve for EpiPens, you should tell Mylan's CEO that total revenue will increase if she raises the price of EpiPens because the demand curve in this region is relatively elastic. True False On the previous graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity. Dashed drop lines will automatically extend to both axes. On the previous graph, use the purple point (diamond symbol) to indicate the average total cost at the profit-maximizing quantity. Then use the green rectangle (triangle symbols) to shade the area indicating the firm's economic profit. Consider the pharmaceutical company Mylan that produces epinephrine injection devices called EpiPens. In the presence of other firms producing substitutes for this good, the price of EpiPens is $150. Now suppose that competitors to Mylan no longer produce epinephrine injection devices, so Mylan now has pricing or in this market. As the economist on staff at Mylan, you are charged with the task of figuring out what your company's new pricing strategy should be. The following graph shows the marginal cost (MC), which is assumed to be constant, and the average total cost (ATC) of Mylan. The graph also shows the demand curve (D) for EpiPens and the marginal revenue curve (MR) once the firm has market power. On the graph, use the grey point (star symbol) to indicate the quantity of EpiPens demanded if Mylan continues to charge $150. Dashed drop lines will automatically extend to both axes. PRICE (Dollars per EpiPen) 1000 000 800 700+ 600 500 400 300 200 100 MR 0 1 2 3 4 5 + $150 Profit Max ATC at Profit Max ATC Profit MC- D 7 . 10 QUANTITY (Thousands of EpiPens)
If Mylan continues to charge $150 per EpiPen, Mylan will earn economic profit. True or False: Given the demand curve for EpiPens, you should tell Mylan's CEO that total revenue will increase if she raises the price of EpiPens because the demand curve in this region is relatively elastic. True False On the previous graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity. Dashed drop lines will automatically extend to both axes. On the previous graph, use the purple point (diamond symbol) to indicate the average total cost at the profit-maximizing quantity. Then use the green rectangle (triangle symbols) to shade the area indicating the firm's economic profit. Consider the pharmaceutical company Mylan that produces epinephrine injection devices called EpiPens. In the presence of other firms producing substitutes for this good, the price of EpiPens is $150. Now suppose that competitors to Mylan no longer produce epinephrine injection devices, so Mylan now has pricing or in this market. As the economist on staff at Mylan, you are charged with the task of figuring out what your company's new pricing strategy should be. The following graph shows the marginal cost (MC), which is assumed to be constant, and the average total cost (ATC) of Mylan. The graph also shows the demand curve (D) for EpiPens and the marginal revenue curve (MR) once the firm has market power. On the graph, use the grey point (star symbol) to indicate the quantity of EpiPens demanded if Mylan continues to charge $150. Dashed drop lines will automatically extend to both axes. PRICE (Dollars per EpiPen) 1000 000 800 700+ 600 500 400 300 200 100 MR 0 1 2 3 4 5 + $150 Profit Max ATC at Profit Max ATC Profit MC- D 7 . 10 QUANTITY (Thousands of EpiPens)
Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter24: Price-searcher Markets With High Entry Barriers
Section: Chapter Questions
Problem 13CQ
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The young expert Hand written solution is not allowed.
Transcribed Image Text:If Mylan continues to charge $150 per EpiPen, Mylan will earn
economic profit.
True or False: Given the demand curve for EpiPens, you should tell Mylan's CEO that total revenue will increase if she raises the price of EpiPens
because the demand curve in this region is relatively elastic.
True
False
On the previous graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity. Dashed drop lines will automatically
extend to both axes.
On the previous graph, use the purple point (diamond symbol) to indicate the average total cost at the profit-maximizing quantity. Then use the green
rectangle (triangle symbols) to shade the area indicating the firm's economic profit.
Transcribed Image Text:Consider the pharmaceutical company Mylan that produces epinephrine injection devices called EpiPens. In the presence of other firms producing
substitutes for this good, the price of EpiPens is $150.
Now suppose that competitors to Mylan no longer produce epinephrine injection devices, so Mylan now has pricing
or in this market. As the
economist on staff at Mylan, you are charged with the task of figuring out what your company's new pricing strategy should be.
The following graph shows the marginal cost (MC), which is assumed to be constant, and the average total cost (ATC) of Mylan. The graph also shows
the demand curve (D) for EpiPens and the marginal revenue curve (MR) once the firm has market power.
On the graph, use the grey point (star symbol) to indicate the quantity of EpiPens demanded if Mylan continues to charge $150. Dashed drop lines will
automatically extend to both axes.
PRICE (Dollars per EpiPen)
1000
000
800
700+
600
500
400
300
200
100
MR
0
1
2
3
4
5
+
$150
Profit Max
ATC at Profit Max
ATC
Profit
MC-
D
7
.
10
QUANTITY (Thousands of EpiPens)
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