The Figure Below Illustrates the Private Costs and Benefits of Producing

question 55

Essay

The figure below illustrates the private costs and benefits of producing trisenian, a new miracle drug. a) Draw the MSB and MSC curves on the graph assuming the external benefits are estimated at $6 per unit and the external costs at $3 per unit.
b) What are the most desirable price and quantity from society's point of view?
c) If government wanted to increase the quantity to the amount in b) above, what subsidy would it need to give the producers?
d) If, instead, government wanted to increase the quantity to the amount in b) above, what subsidy would it need to given consumers?

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Definitions:

Apoenzyme

The protein component of an enzyme, to which a coenzyme or cofactor must bind to form an active enzyme.

Nonpolypeptide

Referring to molecules that are not composed of peptide bonds and amino acid chains, contrary to proteins.

Coenzyme

An organic non-protein molecule that binds with an enzyme to catalyze a reaction.

Enzyme Activity

The measure of the amount of substrate converted to product by an enzyme in a given time, crucial for biochemical processes.