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Suppose you are the manager of a small pharmaceutical firm that received a patent on a new drug 3-years before. Despite strong sales ($125million last year) and a low marginal cost of manufacturing the product ($0.25 per pill), your firm has yet to demonstrate a profit from selling the drug. This is, in part due to the fact that the company spent 1.2 billion developing the drug and obtaining FDA approval. An economist has estimated that, at the current price of $1.25 per pill, the own price elasticity of demand for the drug is -2.5. Based on this information, what can you do to boost profits? Explain

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M9309893

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