The Core Principles of EconomicsEnd of Chapter ProblemIn 2016, the top-selling pharmaceutical drug in the world was AbbVie's Humira, which is used for the treatment of severalcommon, chronic conditions. The majority of its profits are derived from treatment of the most common diseases, but AbbViealso develops drugs for rare conditions.Why might AbbVie develop drugs for rare diseases instead of investing all of its resources toward drugs for common diseases?It is possible thatthe interdependence principle may be guiding AbbVie to develop and produce drugs for rare conditions. Commonchronic and rare conditions are often experienced by the same people, so AbbVie can easily produce drugs for both.the opportunity-cost principle may encourage AbbVie to produce drugs for rare conditions, because the full benefitsoutweigh the costs. The company must be maximizing its total economic surplus.O framing effects may be enticing AbbVie to develop and produce drugs for rare conditions. Since these drugs are moreexpensive, AbbVie will make a large profit.the marginal principle may be guiding AbbVie in determining if it is worth producing drugs for rare diseases. Since itis developing and producing treatments for rare diseases, the marginal benefits must exceed the costs.

Interdependence principle: This principle states that decisions made by one person or group can…

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Why might AbbVie develop drugs for rare diseases instead of investing all of its resources toward drugs for common diseases?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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