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Pharmaceutical Benefits Managers or PBM's are intermediaries between upstream drug manufacturers and downstream insurance companies. They design formularies (list of drugs that insurance will cover) and negotiate prices with drug companies. PBM's want a wider variety of drugs available to their insured populations, but at low prices. Suppose that they are negotiating with two non-drowsy allergy drugs, Claritin and Allegra, for inclusion on the formulary. The "value" or "surplus" created by including one non-drowsy allergy drug on the formulary is $100, but the value of the second drug is only $30.
a. What's the likely bargaining negotiation outcome if the PBM bargains by telling each drug company that they are going to reach agreement with the other drug company?
b. Now suppose the two drug companies merge. What is the likely post-merger bargaining outcome?
Some economists believe that creeping inflation cannot be accepted because a gradual increase in prices leads to an ever-rising rate of inflation. Other economists argue that in order to achieve economic growth, some moderate price increases are nece..
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Explain and graphically illustrate the effects of the tax cut on aggregate output, consumption, employment and the real wage.
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One stay-at-home mom laments, “Lots of career women think the only reason I’m staying home is that I’m not capable of doing anything else.” Evaluate this criticism. In other words, is it true that the only reason women don’t enter the labor force is ..
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Explain the entities affected by social regulation. My question is Illustrate what do they mean by the word "entities"?
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