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A monopoly drug company produces a lifesaving medicine at a constant cost of $10 per dose. The demand for this medicine is perfectly inelastic at prices less than or equal to the $100 (per day) income of the 100 patients who need to take this drug daily. At a higher price, nothing is bought. Show the equilibrium price and quantity and the consumer and producer surplus in a graph. Now the government imposes a price ceiling of $30. Show how the equilibrium, consumer surplus, and producer surplus change. What is the deadweight loss, if any, from this price control?

Econometrics, Economics

  • Category:- Econometrics
  • Reference No.:- M92099042

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