1. The inverse demand for a drug that treats insomnia is given by P = 6,000 - 20Q, where Q measures the number of drug treatments and P is the price per treatment. Suppose that the marginal cost per drug treatment is constant at $20. What is the profit-maximizing price per drug treatment?
- $3,010
- $1,505
- $2,000
- $600
2. Suppose the market for peaches is perfectly competitive and unregulated. Suppose also that the chemicals used to keep the peaches insect-free damage the environment by an estimated $0.5 per bushel of peach. Suppose QD = 1000 - 100P and QS = -100 + 100P. The price consumers would have to pay for the market to achieve the socially optimal level of production is