Question 17
After spending 10 years and $1.5 billion, you have finally gotten Food and Drug Administration (FDA) approval to sell your new patented wonder drug, which reduces the aches and pains associated with aging joints. You will market this drug under the brand name of Ageless. Market research indicates that the elasticity of demand for Ageless is 1.25 (at all points on the demand curve). You estimate the marginal cost of manufacturing and selling one additional dose of Ageless is $1.
Based on the above data, answer the given subquestions.
Choose the correct alternative
R&D costs are sunk costs so do not enter the pricing decision
The elasticity of demand you face for Ageless is going to rise when your patent expires as many close substitutes to Ageless would be available
Both R&D costs are sunk costs so do not enter the pricing decision and The elasticity of demand you face for Ageless is going to rise when your patent expires as many close substitutes to Ageless would be available
None of these