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QUESTION 3 Another solution for antibiotic resistance is the development of new drugs that defeat resistant bacteria. Such research and development has a high fixed cost and can only be undertaken in industries with high market concentration where firms have significant monopoly power, like the pharmaceutical industry. Examine this industry using the theory and models of industry structure. Should government be worried about any aspect of how an industry with this market structure will perform?

QUESTION 3 Another solution for antibiotic resistance is the development of new drugs that defeat resistant bacteria. Such research and development has a high fixed cost and can only be undertaken in industries with high market concentration where firms have significant monopoly power, like the pharmaceutical industry. Examine this industry using the theory and models of industry structure. Should government be worried about any aspect of how an industry with this market structure will perform?

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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May I know for Question 3, the industry is monopoly or oligopoly?

QUESTION 2 Penicillin is ineffective against the coronavirus. In general, inappropriate use of penicillin, where it cannot alleviate symptoms or cure a disease, is contributing to antibiotic resistance, meaning bacteria are evolving to defeat the drug. This is endangering lives because of a rise in untreatable infections. Use the theories of market failure and government intervention to explain (i) why both patients and their prescribing physicians are failing to reduce the inappropriate consumption of penicillin, and (ii) what suitable government interventions may help this situation. Critically discuss potential problems with these interventions. QUESTION 3 Another solution for antibiotic resistance is the development of new drugs that defeat resistant bacteria. Such research and development has a high fixed cost and can only be undertaken in industries with high market concentration where firms have significant monopoly power, like the pharmaceutical industry. Examine this industry using the theory and models of industry structure. Should government be worried about any aspect of how an industry with this market structure will perform? QUESTION 4 Pfizer is one of the world's largest pharmaceutical companies. When developing a new drug this company needs to consider vertical integration. Using the theory of the optimal boundary of the firm, discuss Pfizer's make-or-buy decision for developing and producing a new antibiotic drug. What stages of the vertical chain should Pfizer consider conducting inhouse, and which should be outsourced? Provide reasons for your findings. QUESTION 5 Pfizer and a competitor, Astra-Zeneca, are considering developing a new drug for a particular illness at the same time. The illness is relatively rare but the fixed cost of production is very high. In particular, the forecast demand for such a drug is insufficient to cover both firms' costs. Analyse the interaction between the two firms using game theory. Present a payoff matrix to model the situation and analyse it for Nash equilibrium. What can either of these firms do to make their best, most- preferred outcome more likely?
Transcribed Image Text:QUESTION 2 Penicillin is ineffective against the coronavirus. In general, inappropriate use of penicillin, where it cannot alleviate symptoms or cure a disease, is contributing to antibiotic resistance, meaning bacteria are evolving to defeat the drug. This is endangering lives because of a rise in untreatable infections. Use the theories of market failure and government intervention to explain (i) why both patients and their prescribing physicians are failing to reduce the inappropriate consumption of penicillin, and (ii) what suitable government interventions may help this situation. Critically discuss potential problems with these interventions. QUESTION 3 Another solution for antibiotic resistance is the development of new drugs that defeat resistant bacteria. Such research and development has a high fixed cost and can only be undertaken in industries with high market concentration where firms have significant monopoly power, like the pharmaceutical industry. Examine this industry using the theory and models of industry structure. Should government be worried about any aspect of how an industry with this market structure will perform? QUESTION 4 Pfizer is one of the world's largest pharmaceutical companies. When developing a new drug this company needs to consider vertical integration. Using the theory of the optimal boundary of the firm, discuss Pfizer's make-or-buy decision for developing and producing a new antibiotic drug. What stages of the vertical chain should Pfizer consider conducting inhouse, and which should be outsourced? Provide reasons for your findings. QUESTION 5 Pfizer and a competitor, Astra-Zeneca, are considering developing a new drug for a particular illness at the same time. The illness is relatively rare but the fixed cost of production is very high. In particular, the forecast demand for such a drug is insufficient to cover both firms' costs. Analyse the interaction between the two firms using game theory. Present a payoff matrix to model the situation and analyse it for Nash equilibrium. What can either of these firms do to make their best, most- preferred outcome more likely?
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