- Anagerial Economics Economics Of Strategy 74801 05 07 2022 12p The Drug Company Medican Had A Patent On Cancelux 1 (143.2 KiB) Viewed 21 times
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anagerial Economics/Economics of Strategy (74801), 05.07.2022 > (12P) The drug company Medican had a patent on "Cancelux", a drug against lung cancer. After 15 years, the drug goes off pa- tent. Patients using the drug wonder how much Medican now charges for the drug, after generic drugs have entered the market. You explain them under what circumstances patients can expect to pay more or less less for the drug Cancelux after the patent expires. A monopoly maximizes profit by producing the quantity where bitte auswählen ---- It then charges the price ---- bitte auswählen ---- When generic drugs enter the market after the patent on a brand-name drug expires, the demand curve facing the brand-name firm ---- bitte auswählen ---- The demand curve also bitte auswählen ---- at the original price and becomes steeper. The firm now maximizes its profit at a point where the quantity is bitte auswählen ---- ✓ However, the new profit-maximizing price may be higher than the initial price because the demand curve is less elastic at the new optimum. This is possible if the brand-name firm has two types of consumers with different bitte auswählen Loyal consumers may prefer the brand-name drug because they are more comfortable with a familiar product, worry that new products may be substandard, or fear that differen- ces in the ingredients might affect them. However, if the leftward shift is parallel, then the new demand curve's slope ---- bitte auswählen ---- That is, the demand curve becomes no steeper. At the smaller quantity, the elasticity of demand becomes more elastic. Therefore, the brand-name firm will ---- bitte auswählen ---- 4
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me firm now maximizes its profit at a point where the quantity is bitte auswählen V However, the new profit-maximizing price may be higher than the initial price because the demand curve is less elastic at the new optimum. This is possible if the brand-name firm has two types of consumers with different bitte auswählen ---- bitte auswählen. cross-price elasticities of supply elasticities of demand cross-price elasticities of demand elasticities of income elasticities and cross-price elasticities of supply and becomes more elastic. Therefore, the brand-name firm will elasticities of supply ---- Loyal consumers may prefer the brand-nar ces in the ingredients might affect them. H **** That is, the demand curve becomes no ste ---- bitte auswählen ---- familiar product, worry that new products may be substandard, or fear that differen- v demand curve's slope ---- bitte auswählen ----
g price may be higher than the initial price because the demand curve is less elastic at the new optimum. This is possible if the brand-name firm has two types of consumers with different ---- bitte auswählen ---- Loyal consumers may prefer the brand-name drug because they are more comfortable with a familiar product, worry that new products may be substandard, or fear that differen- ces in the ingredients might affect them. However, if the leftward shift is parallel, then the new demand curve's slope -- bitte auswählen v --- bitte auswonlen ---- That is, the demand curve becomes no steeper. At the smaller quantity, the elasticity of demand becomes more elast is positive ---- bitte auswählen ---- becomes constant becomes infinite does not change becomes smaller becomes larger ime firm will
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