15. Approximately 14 million Americans are addicted to drugs and alcohol. Thefederal government estimates that these addicts cost the U.S. economy $300billion in medical expenses and lost productivity. Despite the enormous potentialmarket, many biotech companies have shied away from funding research anddevelopment (R&D) initiatives to find a cure for drug and alcohol addiction.Your firm DrugAbuse Sciences (DAS)-is a notable exception. It has spent$170 million to date working on a cure, but is now at a crossroads. It can eitherabandon its program or invest another $30 million today. Unfortunately, thefirm's opportunity cost of funds is 7 percent and it will take another five yearsbefore final approval from the Federal Drug Administration is achieved and theproduct is actually sold. Expected (year-end) profits from selling the drug arepresented in the accompanying table. Should DAS continue with its plan tobring the drug to market, or should it abandon the project? Explain.Year-End Profit ProjectionsYear 1Year 2Year 3 Year 4Year 5Year 6Year 7Year 8Year 9$0$0$0$0$15,000,000 $16,500,000$18,150,000 $19,965,000$21,961,500

In order to determine whether the project should be continued or abandoned, we must determine the…

Answered: 15. Approximately 14 million Americans…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

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15. Approximately 14 million Americans are addicted to drugs and alcohol. The federal government estimates that these addicts cost the U.S. economy $300 billion in medical expenses and lost productivity. Despite the enormous potential market, many biotech companies have shied away from funding research and development (R&D) initiatives to find a cure for drug and alcohol addiction. Your firm DrugAbuse Sciences (DAS)-is a notable exception. It has spent $170 million to date working on a cure, but is now at a crossroads. It can either abandon its program or invest another $30 million today. Unfortunately, the firm's opportunity cost of funds is 7 percent and it will take another five years before final approval from the Federal Drug Administration is achieved and the product is actually sold. Expected (year-end) profits from selling the drug are presented in the accompanying table. Should DAS continue with its plan to bring the drug to market, or should it abandon the project? Explain.
Approximately 14 million Americans are addicted to drugs and alcohol. The federal government estimates that these addicts-cost the U.S. economy $300 billion in medical expenses and lost productivity. Despite the enormous potential market, many biotech companie have shied away from funding research and development (R&D) initiatives to find a cure for drug and alcohol addiction. Your firm - Drug Abuse Sciences (DAS) - is a notable exception. It has spent $200 million to date working on a cure, but is now at a crossroads. can either abandon its program or invest another $60 million today. Unfortunately, the firm's opportunity cost of funds is 5 percent an it will take another five years before final approval from the Federal Drug Administration is achieved and the product is actually sold. Expected (year-end) profits from selling the drug are presented in the accompanying table. Year 1 $0 Year 2 $0 Year 3 $0 Year 4 $0 Year 5 $12,300,000 Year 6 $14,100,000 Year 7 $16,500,000 Year 8…
Frustration over US pharmaceutical pricing has led researchers to develop frameworks for evaluation that can be used by any purchaser or patient making complex drug choices. One of the most prominent, the Institute for Clinical and Economic Review, uses clinical trial data and compares value -- per quality adjusted life year (QALY) -- under actual market pricing and other possible references prices for specific drugs. Do you think $/QALY is an appropriate metric for evaluating the value of new drugs?
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21. Which of the following most accurately completes the statement? If drugs such as marijuana and cocaine were legalized, it would be likely that Question 21 options: a) there would be an increase in the frequency of tainted and poor quality versions of these drugs that severely harm users. b) their prices would increase and quality would decline as innovation would cease in drug production. c) there would be more violence occurring in transactions involving these substances as producers fight for expanded customers. d) their prices would decrease, quality reliability would improve, and there would be less violence occurring in transactions. 24. Both price floors and price ceilings lead to Question 24 options: a) a reduction in the quantity traded. b) improvements in market efficiency. c)…
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NutraSweet Aspartame is a low-calorie, high-intensity sweetener known by Monsanto’s brand name, NutraSweet. It was the key to the success of Diet Coke and Diet Pepsi in the 1980s. NutraSweet made billions of dollars, yielding very high profits. Such profits usually attract entry, but in this case entry was barred by a patent on the sweetener and because the process of creating the sweetener was expensive and difficult. Monsanto had a distinct capability—its monopoly. It had also created another strategic asset—the NutraSweet brand name as represented by its trademark ‘swirl.’ The problem was that Monsanto’s patent was about to expire. As a result, the Holland Sweetener Company began building an aspartame plant in Geleen, the Netherlands, to challenge Monsanto’s hold on the aspartame market. Holland Sweetener was a joint venture between the Japanese Tosoh Corporation and DSM (Dutch State Mines). What did Monsanto do? Why? What did Holland Sweetener do? Why?
Suppose there are two types of dentists: good and bad. Good dentists went to accredited dental schools, generally know what they’re doing, and provide good dental care. Bad dentists are fakes. They never went to dental school, so they provide shoddy treatment. In fact, most patients actually develop cavities about a month after a visit to a bad dentist. Suppose that a good dentist cannot charge less than $100 per visit without losing money. On the other hand, a bad dentist could charge $50 per visit without losing money. The problem is that it’s impossible for patients to tell good from bad dentists before they visit. However, due to news reports, consumers think that about 60% of all dentists are “bad” dentists. A consumer is willing to pay a good dentist $150 per visit, and is willing to pay $0 to visit a bad dentist. What is the most likely percentage of patients that good dentists will treat? A. 0% B. 60% C. 90% D. 75% E. 100%
Differential Pricing of Pharmaceuticals — The HIV/AIDS Crisis The HIV/AIDS crisis has been called the worst pandemic since the fourteenth-century’s Black Plague. The first incident of HIV/AIDS was discovered by the U.S. Centers for Disease Control in 1981.Over the next three decades, 60 million people have become infected and 25 million have died. Most HIV/AIDS cases are reported in the developing world, where 95 percent of those with HIV live today. Beyond social welfare and humanitarian concerns, as a result of globalization and the fastest growing international business opportunities in China and India, AIDS is now everybody’s business. Because the pharmaceutical industry especially relies upon governmental authority to approve formularies for reimbursement, to protect its monopoly patent rights, and to prevent importation of unauthorized, unlicensed imitation medicines, the question of how to price AIDS drugs is a public issue. Although no one has yet developed a cure for HIV, a…
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Question 12 In order to bring to South Korea a Therapy-based mental health app, you first need to roughly estimate your market demand. Your market research (country report) yields the following statistics: -Therapy mental health app users in China: 30M -Total adult population in China: 1.2B -Total adult population in Korea: 40M -Smartphone ownership in Korea: 94% -At least "somewhat interested" in mental health products in Korea: 30% -Currently using similar apps (mediation or mindfulness) in Korea: 4M According to the Analogy method, market demand estimate could be: 4M 30M/3 = 10M (because Korean population is one third of the Chinese population) 30M Both options 1) and 2)

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