You Are Consultant At Large International Consultancy Pharmcons Specialized In Consulting Firms In The Pharmaceutic 1 (44.28 KiB) Viewed 57 times
You Are Consultant At Large International Consultancy Pharmcons Specialized In Consulting Firms In The Pharmaceutic 2 (18.57 KiB) Viewed 57 times
You Are Consultant At Large International Consultancy Pharmcons Specialized In Consulting Firms In The Pharmaceutic 3 (27.5 KiB) Viewed 57 times
You are consultant at large international consultancy ("PharmCons"), specialized in consulting firms in the pharmaceutical industry. PharmCons has its Asia-Pacific headquarter in Singapore. Dr. Lee, the CEO of a newly established Singaporean pharmaceutical firm ("SinPharm"), which owns the protected patent for vaccine for Dengue- fever, approaches PharmCons. He is an excellent biologist but he and his employees are not well trained in managerial economics. So he needs advise on how to "make the best out of his patent” in an economic sense. Your colleagues at PharmCons have already estimated the market demand function for the vaccine. The accountancy division of SinPharm provides information with respect to relevant production costs. The (inverse) demand for the vaccine is estimated as P = 301 – 4*Q. The marginal costs (MC) are equal to MC = 1 and fixed costs (FC) are equal to FC = 1,000.
You are tasked to provide Dr. Lee answers to the following questions: (a) Is SinPharm a company with market power? Explain. (b) What is SinPharm's marginal revenue (MR) function? (c) What are the initial optimal Price and Quantity of SinPharm?
Dr. Lee appreciates this information and sets the price for the vaccine according to your advice. But after a year he approaches your boss again. Dr. Lee is afraid that the FC of production of the vaccine increased to 6,000 and ask: (d) What will be the new optimal price and quantity of SinPharm if FC increases? (e) Has the increase in FC any implications for running the business?
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