sclero459

sclero459

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Canadian National Institute of Health

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Sociology1Accounting2Calculus1Biology5Mathematics1Chemistry2

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below i will give some details and help me to draw an isoprofit curve. Thanks

Label the x-axis as "Quantity of Bedaquiline."
Label the y-axis as "Price of Bedaquiline."
Draw a downward-sloping isoprofit curve that starts at a profit-maximizing price of $46.
Now, let's explain what this diagram represents:

Profit (Producer Surplus):

Mark the point on the isoprofit curve where the price is $46. This is the initial profit-maximizing price for J&J.

Calculate the area above the supply curve and below the price of $46 up to the quantity produced. This area represents J&J's producer surplus at the original price of $46.

Markup:
3. Calculate the difference between the price ($46) and the cost of production ($5). This difference, $41, represents the markup that J&J was earning per unit of bedaquiline sold at the original price.

Consumer Surplus:
4. Now, mark the point on the isoprofit curve where the price is reduced to $8.

Calculate the area above the supply curve and below the price of $8 up to the quantity produced at this new price. This area represents the consumer surplus gained by consumers due to the price reduction.

Subtract the original consumer surplus (before the price reduction) from the new consumer surplus (after the price reduction). The difference between the two represents the change in consumer surplus.

Output:
7. The quantity of bedaquiline produced at the new price of $8 is determined by the intersection of the demand curve (you can assume a straight-line demand curve) and the new price level.

Now, let's explain the economic implications of this diagram:

Profit (Producer Surplus): J&J's producer surplus decreases as a result of the price reduction. This is because they are now selling the product at a lower price, and their profit per unit sold has decreased.

Markup: The markup, which was initially $41 per unit, has decreased significantly due to the price reduction.

Consumer Surplus: Consumer surplus has increased as a result of the price reduction. Consumers are now able to purchase bedaquiline at a lower price, leading to a larger consumer surplus.

Output: The quantity of bedaquiline produced has likely increased due to the lower price, making it more affordable for consumers, which also contributes to the increase in consumer surplus.

In summary, J&J's decision to reduce the price of bedaquiline from $46 to $8 per month has led to a decrease in producer surplus (profit), a significant decrease in markup, an increase in consumer surplus, and a likely increase in the quantity of bedaquiline produced. This decision reflects a trade-off between lower profits for the company and increased access and affordability for consumers, especially in the context of healthcare and drug pricing.

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