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 diagram. 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?

  • CreatedNovember 13, 2014
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