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You are the manager of a small pharmaceutical company that received a patent on a new drug three years ago (patents in the U.S. are valid for 20 years). Despite strong sales ($125 million last year) and a low marginal cost of producing the product ($0.25 per pill), your company has yet to show a profit from selling the drug. This is, in part, due to the fact that your company spent $1.2 billion developing the drug and obtaining FDA approval. An economist has estimated that, at the current price of $1.25 per pill, the price elasticity of demand for the drug is negative 2.5 (-2.5). Based on this information what can you do to boost PROFITS. (Hint: Remember that profit is defined as total revenue minus total cost. Make sure your answer includes information on both revenue and cost.)
It has now become common for firms situating assembly plants to make states compete for their industry; states and local governments often race to offer most generous tax profits.
Mr. and Mrs. Ward typically vote oppositely in elections and so their votes "cancel each other out." They each gain two units of utility from a vote for their positions (and lose two units of utility from a vote against their positions). However, ..
The price elasticity of demand for fresh tomatoes has beenestimated to be -2.22. If a new insecticide and fertilizertreatment yields a 20percent increase in the nation's fresh tomatocrop, how will that affect total expenditures on fresh tomatoes
Explain why market power leads to a deadweight loss. Is the total deadweight loss from market power for the economy large or small. A student argues, "If a monopolist finds a way of producing a good at lower cost, he will not lower his price. Becau..
the rise of the dollar could batter the profits of some U.S. companies this year and slice into capital spending . a.which companies may have thier profits battered , and why b.why would this slice into capital spending
Assume the following data describe the gasoline market: Price per gallon $2.00 2.25 2.50 2.75 3.00 3.25 3.50 Quantity Demanded 32 30 29 28 22 21 20 Quantity Supplied 16 20 24 28 32 36 40 (a) What is the equilibrium price?
Analyze the dynamics of supply and demand to anticipate market equilibrium and analyze the elasticity of demand and supply and its importance, and the effect of taxes or other public policies.
Find out the optimal crude oil allocation in the preceding example if the profit associated with fiber were cut in half, that is, fell to $0.375 per square foot.
Use Starbucks as the company, please help identify market structure of the organization. Evaluate the effectiveness of this structure for the company.
Externalities are third party consequence of some other action. They can be positive or negative externalities and they impose a benefit or cost to a third party.
The switch to the use of HFCS from sugar in soft drinks was prompted in large part by its relatively lower price. Assuming a competitive market, what effect would this change have on the equilibrium price and output for soft drinks?
Suppose the government cuts its purchases through $120 billion. As a result, budget deficit is decreased by $40 billion, private domestic saving reduced by $10 billion,
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