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Homework answers / question archive / Suppose Bedox is a patent drug for man's beauty
Suppose Bedox is a patent drug for man's beauty. Her manufacturer faces a market demand for Bedox of Q = 1,000 - 0.2P. She has a cost function of C = 300,000 - 1,000Q + 100? a. b. c. What is the profit-maximizing output level and price? What is the profit? Show your calculation (7 marks) Show the above results on a well-labeled diagram. (6 marks) Suppose the government considers this "unfair to consumers" by allowing Bedox to charge such a high price. As such, the government has decided to impose a lump-sum tax of $200,000 on Bedox. Explain whether this policy can help alleviate the "unfairness to consumers". (3 marks)
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