Suppose a company has invented and patented a new effective drug to treat hay fever. The...
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Suppose a company has invented and patented a new effective drug to treat hay fever. The marginal cost of producing the drug is MC-$4. Without being covered in any insurance plan, the market demand is as follows: Qd=800-40P Suppose the drug is covered by a public health insurance plan with a co-insurance rate of 20% and everyone is eligible. What is the market demand under this insurance policy? What price should the company charge and what is the equilibrium quantity? Suppose the public health insurer now demands that the maximum price (P) the company can charge is $12, or the drug will not be covered under its insurance policy. In this situation, what price the firm should charge and how much should they produce? Justify your answer. Suppose a company has invented and patented a new effective drug to treat hay fever. The marginal cost of producing the drug is MC-$4. Without being covered in any insurance plan, the market demand is as follows: Qd=800-40P Suppose the drug is covered by a public health insurance plan with a co-insurance rate of 20% and everyone is eligible. What is the market demand under this insurance policy? What price should the company charge and what is the equilibrium quantity? Suppose the public health insurer now demands that the maximum price (P) the company can charge is $12, or the drug will not be covered under its insurance policy. In this situation, what price the firm should charge and how much should they produce? Justify your answer.
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Microeconomics An Intuitive Approach with Calculus
ISBN: 978-0538453257
1st edition
Authors: Thomas Nechyba
Posted Date:
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