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Category: Economics

  • (Answered) Read the following article, which introduces the concept of monopoly. Then answer the question that…

    The Virtual Monopoly of EpiPens
    by the Aplia Economics Content Team
    Read the following article, which introduces the concept of monopoly. Then answer the question that follows.
    In 2007, as part of a $6.7 billion deal with Merck & Co., Inc., one of the largest pharmaceutical companies in the world, Mylan N.V., an American generic and specialty pharmaceuticals company, acquired the EpiPen, an epinephrine injection device used to treat the potentially fatal allergic reaction known as anaphylaxis. At the time, EpiPen was not a household brand that everyone knew, but efforts by Mylan’s CEO Heather Bresch changed the landscape for this device. According to Jen Wieczner, in an article in Fortune:
    “She poured marketing resources into the product, and embarked on an awareness and political campaign to get more EpiPens into schools and other public institutions. Today, 47 states have laws about making epinephrine auto-injectors available at school in case of an anaphylaxis incident, largely as a result of Bresch’s efforts” (Jen Wieczner, “Mylan CEO Blamed Obama Care for EpiPen Sticker Shock,” Fortune, August 24, 2016).
    The market for such devices was relatively competitive until EpiPen’s biggest competitor, Sanofi’s Auvi-Q, went off the market in 2015 due to recalls. Because of the severity of allergic reactions treated by the EpiPen, this kind of injection device is hardly optional for those patients who need it. This means that demand for this type of good is likely relatively inelastic; in other words, an increase in price of EpiPens would not have a large affect on the quantity demanded:
    PRICE (Dollars per EpiPen)QUANTITY (EpiPens)DemandP1Q1P2Q2
    In 2016, without major competition to keep prices in check, Mylan took advantage of its virtual monopoly on this life-saving allergy treatment by increasing its price to more than $600 compared to $100 in 2009. According to Wieczner’s follow-up article in Fortune:
    “Public and Congressional outrage not only forced Mylan to pay a $465 million settlement and launch a cheaper, generic version of the injection device, but it also spurred rivals and regulators to speed competing epinephrine injectors to market to lower costs” (Jen Wieczner, “Mylan’s EpiPen Recall Couldn’t Come at a Worse Time,” Fortune, April 3, 2017).
    How did Mylan achieve this kind of market power in the first place? There are many sources of monopoly power, but in this case, the lack of close substitutes, significant barriers to entry, and legal barriers such as patents are the most likely contributors. While today the cost of EpiPens seems to be back under control, what if this situation applied to other necessary goods, such as insulin?
    In what year did Mylan acquire the EpiPen?
    2005
    2007
    2015
    2016

  • (Answered) Hudson Valley Goods, a family-owned company in upstate New York, had built a reputation for…

    Hudson Valley Goods, a family-owned company in upstate New York, had built a reputation for high-quality artisanal food products since its founding in the late 1960s.
    By the 2010s, the business had grown into a national supplier, benefiting from a strong economy marked by steady GDP growth, low unemployment, and robust consumer spending. Taking advantage of low interest rates, the company expanded by financing new factories, upgrading equipment, and broadening its product lines.
    This period of growth, however, relied on the assumption that favorable economic conditions would continue indefinitely. By the early 2020s, inflation began rising sharply. Costs for raw materials such as dairy and wheat climbed, as did wages due to a tight labor market. Hudson Valley faced difficult decisions: raising prices to cover costs risked alienating price-sensitive customers, while maintaining current prices eroded profit margins.
    Consumer spending also shifted as families cut back on discretionary items, including luxury artisanal goods, due to rising living expenses. Simultaneously, a labor shortage strained operations. Despite offering competitive wages, the company struggled to retain workers, many of whom sought less stressful jobs in the gig economy.
    The Federal Reserve’s response to inflation—raising interest rates—compounded the company’s difficulties. Hudson Valley’s variable-rate loans, once manageable, became increasingly costly to service, eating into cash reserves. Meanwhile, slowing GDP growth signaled broader economic challenges. Higher interest rates also curtailed access to affordable credit, further limiting the company’s ability to invest or adapt.
    By 2023, Hudson Valley Goods was at a crossroads. Mounting debt, shrinking demand, and operational challenges forced tough choices. Leadership explored layoffs, production cuts, asset sales, or merging with a larger competitor. Despite the Federal Reserve’s inflation control measures and limited fiscal policy support, the company’s financial position remained precarious, illustrating the challenges businesses face in adapting to volatile economic conditions.
    As Hudson Valley Goods continues to face labor shortages, which government financial policy change could most directly address their hiring challenges?

  • (Answered) Back to AssignmentAttempts \( \square \) Average 2 / 61. Welfare effects of free trade in an…

    Welfare effects of free trade in an exporting country
    The following problem analyzes the Ukrainian market for pumpkins. The graph below shows the domestic supply and demand curves for pumpkins in Ukraine. Assume that Ukraine’s government does not currently permit international trade in pumpkins.
    Use the black point (plus symbol) to denote the equilibrium price of one ton of pumpkins and the equilibrium quantity of pumpkins in Ukraine without international trade. Next, use the green triangle (triangle symbol) to shade in the area that represents consumer surplus in equilibrium. Finally, use the purple triangle (diamond symbol) to shade in the area that represents producer surplus in equilibrium.
    Based on the information from the previous graph, absent international trade total surplus is \( \square \).
    The following graph shows the same domestic supply and demand curves for pumpkins in Ukraine. Now, suppose that the Ukrainian government changes its stance on international trade, deciding to allow free trade in pumpkins. The horizontal black line \(\left(P_{W}\right)\) represents the world price of pumpkins at \(\$ 1,000\) per ton. Assume that Ukraine’s entry into the world market for pumpkins has no effect on the world price and there are no transportation or transaction costs associated with international trade in pumpkins. Also assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place.
    Use the green triangle (triangle symbol) to shade in the area representing consumer surplus, and then use the purple triangle (diamond symbol) to shade in the area representing producer surplus.
    When Ukraine adjusts its trade policy to allow free trade of pumpkins, the price of one ton of pumpkins in Ukraine becomes \(\$ 1,000\). At this price, tons of pumpkins will be demanded in Ukraine, and tons will be supplied by domestic suppliers. Therefore, Ukraine will export tons of pumpkins.
    Using the information from the previous tasks, complete the following table to analyze the welfare effect of allowing free trade.
    With Free Trade
    (Dollars)
    Without Free Trade
    (Dollars)
    Consumer Surplus
    \( \square \)
    \( \square \)
    Producer Surplus
    \( \square \)
    \( \square \)
    When Ukraine allows free trade, the country’s producer surplus – by |, and consumer surplus by . Therefore, the net effect of allowing international trade on Ukraine’s total surplus is a of

  • (Answered) 1. Welfare effects of free trade in an exporting countryThe following problem analyzes the Russian…

    1. Welfare effects of free trade in an exporting country
    The following problem analyzes the Russian market for pumpkins. The graph below shows the domestic supply and demand curves for pumpkins in Russia. Assume that Russia’s government does not currently permit international trade in pumpkins. Use the black point (plus symbol) to denote the equilibrium price of one ton of pumpkins and the equilibrium quantity of pumpkins in Russia without international trade. Next, use the green triangle (triangle symbol) to shade in the area that represents consumer surplus in equilibrium. Finally, use the purple triangle (diamond symbol) to shade in the area that represents producer surplus in equilibrium. Based on the information from the previous graph, absent international trade total surplus is
    The following graph shows the same domestic supply and demand curves for pumpkins in Russia. Now, suppose that the Russian government changes its stance on international trade, deciding to allow free trade in pumpkins. The horizontal black line (P
    W
    ) represents the world price of pumpkins at $1,000 per ton. Assume that Russia’s entry into the world market for pumpkins has no effect on the world price and there are no transportation or transaction costs associated with international trade in pumpkins. Also assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place. Use the green triangle (triangle symbol) to shade in the area representing consumer surplus, and then use the purple triangle (diamond symbol) to shade in the area representing producer surplus.
    When Russia adjusts its trade policy to allow free trade of pumpkins, the price of one ton of pumpkins in Russia becomes $1,000. At this price, _____ tons of pumpkins will be demanded in Russia, _____ tons will be supplied by domestic suppliers. Therefore, Russia will export _____ tons of pumpkins.
    Using the information from the previous tasks, complete the following table to analyze the welfare effect of allowing free trade.
    With Free Trade (Dollars)
    Without Free Trade (Dollars)
    Consumer Surplus
    Producer Surplus
    When Russia allows free trade, the country’s producer surplus _____ by _____, and consumer surplus by _____ . Therefore, the net effect of allowing international trade on Russia’s total surplus is a _____ of

  • (Answered) Using the costs in the table above (question #1), what quantity should the firm produce at the…

    Using the costs in the table above (question #1), what quantity should the firm produce at the following prices in the short-run? What will be the profits of the firm at each price? Briefly explain your answers and show your work.
    Fill in the missing values in the table which represents the costs of a firm:
    Quantity
    TC
    FC
    VC
    MC
    ATC
    AVC
    0
    20
    20
    0
    –
    1
    40
    20
    20
    20
    40
    40
    2
    56
    20
    36
    16
    28
    18
    3
    69
    20
    49
    13
    23
    16.34
    4
    84
    20
    64
    15
    21
    16
    5
    105
    20
    85
    21
    21
    17
    6
    132
    20
    112
    27
    22
    18.67
    7
    161
    20
    141
    29
    23
    20.14
    8
    200
    20
    180
    39
    25
    22.50
    Using the costs in the table above (question #1), what quantity should the firm produce at the following prices in the short-run? What will be the profits of the firm at each price? Briefly explain your answers and show your work.
    P = 15
    P = 19
    P = 22

  • (Answered) he goal of this problem is to study Ban-the-Box policies and whether they help felonsor hurt…

    ➤ Would felons truthfully report their status, and how do detection ℓ and penalty P change that?
    Felons truthfully report only if the expected penalty ℓP exceeds the hiring benefit from lying. If ℓP is smaller than the gain from misreporting, many will lie. If non-felons can credibly and costlessly disclose, firms will favor disclosed applicants and treat non-disclosers as higher risk, increasing screening against undisclosed minorities.

  • (Answered) 2. Calculating marginal revenue from a linear demand curve The blue curve on the following graph…

    2. Calculating marginal revenue from a linear demand curve
    The blue curve on the following graph represents the demand curve facing a firm that can set its own prices. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly.
    On the graph input tool, change the number found in the Quantity Demanded field to determine the prices that correspond to the production of 0, 2, 4, 5, 6, 8, and 10 units of output. Calculate the total revenue for each of these production levels. Then, on the following graph, use the green points (triangle symbol) to plot the results.
    Total Revenue
    Calculate the total revenue if the firm produces 2 versus 1 units. Then, calculate the marginal revenue of the second unit produced. The marginal revenue of the second unit produced is .
    Calculate the total revenue if the firm produces 4 versus 3 units. Then, calculate the marginal revenue of the fourth unit produced. The marginal revenue of the fourth unit produced is .
    Based on your answers from the previous question, and assuming that the marginal revenue curve is a straight line, use the black line (plus symbol) to plot the firm’s marginal revenue curve on the following graph.
    Marginal Revenue
    Comparing your total revenue graph to your marginal revenue graph, you can see that when total revenue is decreasing, marginal revenue is .
    On the graph input tool, change the number found in the Quantity Demanded field to determine the prices that correspond to the production of 0, 2, 4, 5, 6, 8, and 10 units of output. Calculate the total revenue for each of these production levels. Then, on the following graph, use the green points (triangle symbol) to plot the results.

  • (Answered) 6. Who should pay the tax?The following graph gives the labor market for laboratory aides in the…

    6. Who should pay the tax?
    The following graph gives the labor market for laboratory aides in the imaginary country of Paideia. The equilibrium hourly wage is \( \$ 10 \), and the equilibrium number of laboratory aides is 300.
    Suppose the federal government of Paideia has decided to institute an hourly payroll tax of \( \$ 2 \) on laboratory aides and wants to determine whether the tax should be levied on the workers, the employers, or both (in such a way that half the tax is collected from each party). Use the graph input tool to evaluate these three proposals. Entering a number into the Tax Levied on Employers field (initially set at zero dollars per hour) shifts the demand curve down by the amount you enter, and entering a number into the Tax Levied on Workers field (initially set at zero dollars per hour) shifts the supply curve up by the amount you enter. To determine the before-tax wage for each tax proposal, adjust the amount in the Wage field until the quantity of labor supplied equals the quantity of labor demanded. You will not be graded on any changes you make to this graph!
    Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly.
    Graph Input Tool
    Field
    Value / Units
    Wage
    (Dollars per hour)
    Labor Demanded
    (Number of workers)
    Labor Supplied
    (Number of workers)
    Tax Levied on Employers
    (Dollars per hour)
    Tax Levied on Workers
    (Dollars per hour)
    For each of the proposals, use the previous graph to determine the new number of laboratory aides hired. Then compute the after-tax amount paid by employers (that is, the wage paid to workers plus any taxes collected from the employers) and the after-tax amount earned by laboratory aides (that is, the wage received by workers minus any taxes collected from the workers).
    After-Tax Outcomes
    After-Tax Wage Paid by Employers
    After-Tax Wage Received by Workers
    Levied on Employers
    Levied on Workers
    Number of workers
    (Dollars per hour)
    (Dollars per hour)
    (Dollars per hour)
    (Dollars per hour)
    (Number of workers)
    Suppose the government is concerned that laboratory aides already make too little money and, to minimize the share of the tax paid by employees, of the three tax proposals, which is best for accomplishing this goal?
    The proposal in which the entire tax is collected from workers
    The proposal in which the tax is collected from each side evenly
    The proposal in which the tax is collected from employers
    None of the proposals is better than the others

  • (Answered) A logging operation needs 4 worker-hours (L) per 2 crane-hours (K) to move one batch of a hundred…

    A logging operation needs 4 worker-hours (L) per 2 crane-hours (K) to move one batch of a hundred logs in an hour.
    Write down the total cost function for the firm (as a function of K and L), given that the hourly wage (w) is $12 and the lease on the crane (r) is $48 an hour. The firm paid $5000 to have the right to log the area.
    Graph one isocost line with (K) in the vertical axis. Identify which is more expensive. What is the slope of the isocost line? (be aware of which input is in the vertical axis)
    Write down the production function for the logging company, where the output is the number of batches of hundred logs moved per hour.
    Graph one isoquant for this production function.
    What is the (numeric value) Marginal Rate of Technical Substitution? (again, be aware of which input is asked to be in the vertical axis)
    Does this firm’s production function display increasing, constant or decreasing returns to scale?
    Suppose that the firm wants to minimize their total cost while being able to move y ̅ (where y ̅ is some – generic – number) batches of one hundred logs an hour: how many cranes and how many workers would it use?
    Write down the firm’s total cost (TC), variable cost (VC) and fixed cost (FC) functions, as a function of y. In one plot graph the firm’s TC,VC and FC.
    Write down the firm’s average total cost (ATC), average variable cost (AVC), average fixed cost (AFC), and marginal cost (MC) functions, as a function of y. In one plot, graph the ATC, AVC, AFC and MC.
    While traveling abroad, Carolina spends all the money in her purse to buy bowls of udon and pieces of sushi. A bowl of udon costs 120 yen whereas a single piece of sushi is 30 yen. Carolina has 720 yen in her purse. Let 𝑢 denote the number of bowls of udon and 𝑠 denote the number of pieces of sushi.
    2.1. Write down Carolina’s budget constraint.
    2.2. Graph the budget constraint. Please put the number of bowls of udon on the vertical axis.
    2.3. What is the slope of the budget constraint?
    Suppose Carolina’s preferences can be represented by 𝑣(𝑢, 𝑠) = 6𝑢 + 𝑠.
    2.4. Graph two indifference curves for Carolina. Please put the number of bowls of udon on the vertical axis.
    2.5. Identify two bundles among which Carolina is indifferent.
    2.6. What is Carolina’s Marginal Rate of Substitution?
    2.7. What is Carolina’s demand for udon given the current prices and her income?
    2.8. What is Carolina’s demand for sushi pieces given the current prices and her income?
    2.9. In one graph, depict Carolina’s budget constraint, and two indifference curves, one of which must correspond to her optimal consumption bundle. Identify the optimal consumption bundle.
    Suppose that the price of a bowl of udon raises to 240.
    2.10. What is Carolina’s demand for udon given the new prices and her income?
    Using Slutzky’s decomposition, 2.11. How much of the change in her demand for udon is due to the substitution effect and income effect?

  • (Answered) QUESTION 19e) Suppose that this country develops and obtains new technology that enables it to…

    QUESTION 19e)
    Suppose that this country develops and obtains new technology that enables it to produce 50 percent more cern at each level of missle production shown in the table. As a result of this new technology, the new production possibilities curve will lie Choose the answer that goes in the blank. the origin than the original one you graphed in part a.a. closer tob. farther fromc. the same distance fromd. none of the above answers correctly fill in the blank
    closer to
    farther from
    the same distance from
    none of the above answers correctly fill in the blank
    QUESTION 2
    Society will be at points inside the production possibilities curve when:
    resources are not used efficiently
    there is full employment of resources
    per capita income is increasing
    income is distributed equally to all
    all of the above
    QUESTION 38d)
    Given the production possibilities curve provided by the data table in question 8 , what is the cost to this society if food output is increased from 12 to 16 million tons per year?
    0
    6 million tractors
    6 million tons of food
    4 million tractors
    The exact amount can’t be determined.
    QUESTION 49f)
    Under the conditions described in part e, what is the cost of producing 4 missiles per year rather than 2 missiles per year?
    12 million bushels
    15 million bushels
    3 missiles
    3 million bushels
    QUESTION 59d)
    Measured in terms of corn, what is the cost of producing 4 missiles per year rather than 2 missiles per year?
    10 million bushels
    8 million bushels
    2 million bushels
    0 bushels
    QUESTION 6
    Given the data table provided in question 9 (and the production possibilities curve it gives rise to, the appropriate combination of reponses to this question is:
    Note: Read the four questions included in question 9b (provided on your hardcopy) YERY carefulty:
    No, No, No, Yes
    Yes, Yes, No, Yes
    No, Yes, No, Yes
    Yes, No, Yes, No
    QUESTION 7
    If a nation’s production possibilities curve is shown as below (convex to the origin) the opportunity cost of an extra gun:
    increases as more guns are produced
    increases and then decreases as more guns are produced
    decreases as more guns are produced
    decreases and then increases as more guns are produced
    remains constant as more guns are produced
    QUESTION 88c)
    Given the production possibilities curve indicated by the data table provided in question 8, suppose this society produces 20 million tons of food and 6 million tractors per year. Is it operating on the production possibilities curve?
    Yes
    No