If the U.S. government were to note that because drug companies can sell their drugs in Canada and make a profit at those regulated prices and impose a similar set of regulations in the U.S., this would have the effect of
A. raising the price of drugs in the U.S.
B. eliminating all profit for drug companies.
C. decreasing the motivation for U.S. drug companies to innovate in the future.
D. increasing the motivation for Canadian drug companies to innovate in the future.
Answer: C
You might also like to view...
Merit goods have received considerable attention toward the end of this chapter. Can concerts and other publicly provided services be rationalized using these ideas?
What will be an ideal response?
The competitive firm's profit-maximizing quantity of labor is the quantity where the:
A. value of the marginal product of labor is equal to the profit. B. quantity of the marginal product of labor is equal to the market wage. C. quantity of the marginal product of labor is equal to zero. D. value of the marginal product of labor is equal to the market wage.
A government airline safety regulation reduces the probability of a fatal airline crash by 0.005. If the costs associated with each airplane crash are equal to $600 million and the costs of performing more frequent safety inspections equal $4 million, the regulation is:
A. cost-effective because the marginal cost is $3 million and the marginal benefit is $4 million. B. cost-effective because the marginal cost is $4 million and the marginal benefit is $600 million. C. not cost-effective because the marginal cost is $4 million and the marginal benefit is $3 million. D. not cost-effective because the marginal cost is $4 million and the marginal benefit is $1 million.
Figure 7.6 shows prices, demands, and cost data for the only restaurant in a small town. What is its profit from non-senior customers under the senior discount policy of a $7 senior price and a $10 non-senior price?
A. $1,200 B. $1,500 C. $2,280 D. $2,560