Suppose that a monopoly supplier of a pharmaceutical drug faces a market demand curve Q ¼ 50  P and has zero fixed costs and a constant MC of production equal to 10. a What price and quantity will a...

Suppose that a monopoly supplier of a pharmaceutical drug faces a market demand curve Q ¼ 50  P and has zero fixed costs and a constant MC of production equal to 10. a What price and quantity will a profit-maximising monopolist choose? What is consumer surplus? What are the monopolist’s profits? b Suppose the government decides to regulate the market for the pharmaceutical drug. It offers a subsidy of s per unit to the manufacturer if it allows the government to set the price to consumers equal to 10. What value of s should the government choose? What would be the equilibrium quantity of the drug sold with government intervention? What changes occur in consumer surplus and the manufacturer’s profits? How is the overall surplus affected?