Explanation The economic decisions generally involve opportunity costs mainly due to scarcity of resources. This cost also takes into account the cost incurred in the decision-making process related to the introduction of a new drug. In case, if the drug is introduced in a hurry without proper testing and examination, then it may lead to negative consequences. If some lengthy process is followed to test the drug, then it may result in the death of a patient in need of the medicine due to delay in providing timely medication. There is trade off between the two types of errors while deciding about the introduction of drug. Type I Error: When there are some major side effects of the new drug, which are even greater than the benefits. Type II Error: When the drug is not introduced despite patients needing treatment due to various regulations. While making attempts to reduce one error, the other error would increase simultaneously. The trade off would involve opportunity cost as the FDA has to decide between whether to introduce or not to introduce the drug. The testing process of the drug would involve time and cost. The delay caused due to this may also lead to the deaths of patients. The marginal benefit and marginal cost are required to be balanced by the FDA prior to the introduction of the drug...

Economics of Public Issues (20th Edition) (The Pearson Series in Economics)

20th Edition

ISBN: 9780134531984

Author: Roger LeRoy Miller, Daniel K. Benjamin, Douglass C. North

Publisher: PEARSON

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Question

Chapter 1, Problem 4DQ

To determine

The reduction in Type II Error.

Expert Solution & Answer

Chapter 1 Solutions

Economics of Public Issues (20th Edition) (The Pearson Series in Economics)

Ch. 1 - Prob. 1DQ Ch. 1 - Prob. 2DQ Ch. 1 - Prob. 3DQ Ch. 1 - Prob. 4DQ Ch. 1 - Prob. 5DQ Ch. 1 - Prob. 6DQ

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