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Suppose a drug developer just received a patent on a new chemical compound, which could be used in developing a new drug to control cholesterol. The developer knows (with certainty) that it could successfully develop the compound into a safe, effective (and FDA-approved) drug. If it does so, it can expect to earn a profit of $150 million per year from sales of the drug while the drug is under patent. Assume the firm has a 10% discount rate.
a) If developing the new drug will take 14 years, what is the maximum the drug developer should be willing to invest to develop the new drug? Assume the entire R&D investment must be made in year 1. (That is, if the firm invests $C in year 1, they stand to earn $150m annually from year 15 through year 20. Your job is to calculate C.)
b) If developing the new drug will take 12 years, what is the maximum the drug developer should be willing to invest to develop the new drug?
c) Observers often criticize the FDA's slow process for approving new drugs. Identify two problems that are created if the drug approval process is unnecessarily slow.
The salvage value is expected to be $150,000 at anytime you sell the machine for the next several years. Your MARR is 10%. What is the optimum economic life you predict for the machine?
Scottsdale Print Shop expects to have an annual taxable income of $300,000 from its regular business over the next two years. The company is also considering the proposed acquisition of a new printing machine to expand current business to offer in..
Some observers say that changes in the past few years have eroded the monopoly power of local cable tv companies, even if no other cable firms have entered their markets. What are these changes? Do these monopoly firms still have monopoly powers
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(a) Will a monopolist's total revenue be larger with second-degree price discrimination when the batches on which it charges a uniform price are larger or smaller Why (b) How does a two-part tariff differ from bundling
Choose an existing good or service from Will Bury's Price Elasticity, Incremental expenses, or Thomas Money Service Corporation scenarios, or choose an existing business with which you are familiar.
What is the marginal revenue for hiring a worker for the 1 st hour? For the 2 nd hour and determine how many hours Eva should extend her bakery's hours of operations.
Does microeconomics apply to every nation in the world. Explain your reasoning. and explain the specifics of any cases or examples you use and the implications of similar on local citizens of that country.
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