3.4. EZjoint. After spending 10 years and $1.5 billion, you have finally gotten Food and Drug Administration (FDA) approval to sell your new patented wonder drug, which reduces the aches and pains associated with aging joints. You will market this drug under the brand name of EZjoint. Market research indicates that the demand elasticity for EZjoint is 21.25 (at all points on the demand curve). You estimate the marginal cost of manufacturing and selling one more dose of EZjoint is $1. (a) What is the profit-maximizing price per dose of EZjoint? (b) WouldyouexpecttheelasticityofdemandyoufaceforEZjointtoriseorfall when your patent expires? Suppose that, after patent expiry, a generic version of EZjoint was introduced in the market (under the chemical name clorophospartane). Reacting to entry, EZjoint decided to increase price. (c) Can this behavior be consistent with rational profit maximizing? (Cabral, 20170224)
3.4. EZjoint. After spending 10 years and $1.5 billion, you have finally gotten Food and Drug Administration (FDA) approval to sell your new patented wonder drug, which reduces the aches and pains associated with aging joints. You will market this drug under the brand name of EZjoint.
(a) What is the profit-maximizing
(b) WouldyouexpecttheelasticityofdemandyoufaceforEZjointtoriseorfall when your patent expires?
Suppose that, after patent expiry, a generic version of EZjoint was introduced in the market (under the chemical name clorophospartane). Reacting to entry, EZjoint decided to increase price.
(c) Can this behavior be consistent with rational profit maximizing? (Cabral, 20170224)
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