Consumer Surplus
Not what you're looking for?
A U.S. pharmaceutical company holds a patent on a drug in the U.S. and an analogous patent in Canada. Its marketing department has identified the following inverse demand curves for this drug in the U.S. and Canada:
P us =1,000 - Qdus and P can =500 - Qdcan
The marginal revenues for each market is given by the following:
MRus =1,000 - 2Qus and MRcan =500 - 2Qcan
The firm's cost of producing this drug is given by the following function:
TC = 100Q
QUESTIONS:
How do I determine the profits that the drug company makes in the U.S. market, and the profit it makes in the Canadian market? Also, how do I determine the consumer surplus in both the U.S. market and the Canadian market?
Purchase this Solution
Solution Summary
Find the consumer surplus in both the U.S. market and the Canadian market.
Solution Preview
For the US: MRus = 100
Or, 1000 - 2Qus = 100
Or Qus = (1000 - 100)/2 = 450
So, Pus = 1000 - 450 = $550
Profit = PusQus = $550*450 = ...
Purchase this Solution
Free BrainMass Quizzes
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.