HELLO i HAVE THESE 2 QUESTIONS WITH ANSWERS THEREFORE I’D LIKE TO RECEIVE A DETAILED EXPLANATION OF

Question

HELLO i HAVE THESE 2 QUESTIONS WITH ANSWERS. THEREFORE I’D LIKE TO RECEIVE A DETAILED EXPLANATION OF

THE ANSWER WITH THEORY CONCEPTS AND CALCULATIONS

THANKS

13-58

A drug company is deciding how much to invest in Research and Development into finding a cure for diabetes.

The table below shows the company’s demand for financial capital for RD based on its expected rates of return from selling the cure. Every investment provides an additional 4% social return: that is, an investment that pays at least a 5% return to the drug company will produce at least a 9% return for society as a whole.

If the opportunity cost of financial capital for the drug company is 7%, the drug company will invest ___ in RD if it receives only the private benefits of this investment.

ANSWER a) $250

2) 13-59

A drug company is deciding how much to invest in Research and Development into finding a cure for the common cold. The table below shows the company’s demand for financial capital for RD of this cold drug,

based on its expected rates of return from selling the cure. Every investment has an additional 4% social return: that is, an investment that pays at least a 5% return to the drug company will produce at least a 9% return for society as a whole.

If the opportunity cost of financial capital for the drug company is 7%, the drug company will invest ___ in RD if it receives both the private and the social benefits of this investment.

ANSWER c) $308

Microeconomics