Recalling the information from the \"Botox Patent Monopoly\" application, invers
ID: 1130775 • Letter: R
Question
Recalling the information from the "Botox Patent Monopoly" application, inverse demand was p = 1000-375Q, marginal revenue was MR-1000-750Q. marginal cost was MC-25, a constant, and quantity is in millions of units. What would happen to the equilibrium price and quantity if the government had collected a specific tax of $75 per vial of Botox? The equilibrium price would be S 550. (round your answer to two decimal places) The equilibrium quantity would be 1.20 million units. (round your answer to two decimal places) What welfare effects would such a tax have? The deadweight loss (DWL) isS million. (round your answer to two decimal paces)Explanation / Answer
At equilibrium MR = MC
1000- 750Q = 25
Q= 1.3
P = 1000 - 1.3* 375
= 512. 5
DWL = 0.5* n * d*d *Peq * Qeq; n = 1/d
1/d = Peq/Peq - MC
= 1.0513
DWL = 0.5* 1.053* 512.5 * 1.3
= 350.21
Therefore the dead weight loss = 350.21
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