Question: Please use typing instead of handwriting. Please write clearly if you cannot type. Thank you! ? A monopoly is considering spending xed costs of $100,000

 Please use typing instead of handwriting. Please write clearly if you

Please use typing instead of handwriting. Please write clearly if you cannot type. Thank you!

?

cannot type. Thank you! ? A monopoly is considering spending xed costs

A monopoly is considering spending xed costs of $100,000 to develop in period 1 a new vaccine that will be sold in period 2. The demand curve in period 2 is (9210033, where Q is measured in hundreds of pills and P is the price per pill, and marginal cost is constant at $4. (A) Suppose that the vaccine will be granted patent protection in period 2, and there are no xed costs of production in period 2. Will the monopoly spend $100,000 developing the vaccine during period 1 to sell it during period 2'? If it does, what is the level of consumer surplus in period 2? (B) Now assume that the price of the drug will be regulated, set equal to marginal cost, in period 2, and there are no xed costs of production in period 2. Will the monopoly spend $100,000 developing the drug in period 1 to sell it in period 2 at marginal cost? If it does, what is the level of consumer surplus in period 2

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