Your firm spent $100 million developing a new drug. It has now been approved for...
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Your firm spent $100 million developing a new drug. It has now been approved for sale, and each pill costs $1 to manufacture. Your market research suggests that the price elasticity of demand in the general public is 1.1. Using the marginal cost pricing model, what price do you charge the public? What would happen to profits if you charged twice as much? What role does the $100 million in development costs play in your pricing decision? The Medicaid agency has made a take-it-or-leave-it offer of $2 per pill. Do you accept? Why or why not?
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