# :) Image transcription text Question 2 (a) Healthy Lid., a pharmaceutical company, produces a unique anti-cancer drug in Country A. This anti-cancer drug was launched

🙂 Image transcription text Question 2
(a) Healthy Lid., a pharmaceutical company, produces a unique anti-cancer drug in Country A. This
anti-cancer drug was launched last year after 10 years of research and development. Its
demand and production cost information is listed in Table 3. The total cost includes the rent
of its production plant, which is \$10,000 per month.
Demand Schedule
Production Cost
Quantity Demanded
Price
Total Cost
(Number of bottles per
(\$ per bottle)
(5)
month
100
650
110,000
200
600
130,000
300
550
145,000
400
500
180,000
500
450
220,000
Table 3 – Demand schedule and production cost of Healthy Ltd.
(i) Analyze the conditions that give rise to a monopoly status that Healthy Ltd. owns in
producing the anti-cancer drug in Country A.
(3 marks)
(ii) Based on the information given, construct ONE new table to calculate the marginal cost
and marginal revenue of each production level of the anti-cancer drug. Round all figures
to integer, if applicable.
Quantity
Marginal Cost
Marginal Revenue
(Number of bottles
(\$)
(\$)
per month)
(Remarks: Significant mark deduction applies if the table is broken into 2 parts or 2 tables)
(4 marks)
(ii) What quantity should Healthy Ltd. produce and what price should it charge to maximize
its profit? Is it making a profit or loss? Illustrate this short-run equilibrium in a well
labelled diagram with all critical values. No explanation is needed.
(5 marks)
(b) Ashley is a fresh graduate and is now planning to start a new business. She would run an
online shop to sell snacks imported from Japan. She expects the annual purchase cost would
be \$380,000 and the annual sales would be \$790,000. Four sets of computers are needed,
which cost \$7,000 each and could be sold at half price in the second-hand market after one
year. She has to rent a small office, which costs her \$19,000 per month.
() Calculate the annual accounting profit of Ashely’s snack business.
(4 marks]
(il) Ashley will be involved in the daily operations of this snack business and has to give up the
opportunity to get a full-time job. In consideration of annual economic profit, in what
condition should Ashley start this business? Explain with relevant figures.
(4 marks)