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Monopoly, special case. (9 points) A monopoly drug company produces a life-saving medicine at a constant cost of $10 per dose. There are 100 patients who need to take exactly one unit each day. The demand for this medicine is perfectly inelastic at prices less than or equal to the $200 (the daily income of each patient). At a higher price, nothing is bought. (a) (5 points) What is the profit maximizing quantity? Show in a graph. (b) (4 points) Now the government imposes a price ceiling of $30. Identify the before and after equilibrium on your graph as well as the consumer surplus, producer surplus, government expenditure, and total surplus. What is the deadweight loss from this price control?
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