Pharmaceutical manufacturers sometimes claim that the reason their drugs are so expensive is that the costs of developing these drugs is very high-in fact usually $50 million to $100 million, and taking many years for approval from the FDA.

a. Evaluate this claim (assuming the above cost figures are in fact true).

b. Suppose all new drugs cost 5 cents per pill to manufacture (once they are developed), but the drug companies sell these pills for $1. Suppose the government sets a maximum price for these drugs of 10 cents per pill. What effect would this have on production of drugs already on the mar- ket and on the production of new drugs in the future?