[11]}. A product was developed from a university research spinoft" and the technology was then licensed tn a big pharma company for production. Industry reports estimate that sales of this product in ZDECI totaled 20 million doses at a price of $12 each. Now assume that since the product was developed at a university it has the right to license one more vendor your rm. They offer the license to your rm for $2 per dose. Your rm investigations suggests that you could produce for $5fdose. The question is whether your costs are low enough to withstand the competition that may arise with the pharma company. You are worried that the royalty to the University may give you higher costs than the pharma company. whose cost structure is kept closely guarded. We know very little other than the elasticity which is available from market research. {a} The price elasticity of demand for this medicine is between 2. and 3. 1' Approin'mate the pharma company's marginal cost based on just this knowledge. [3} 1' IWhat is your estimate ofexpected\" marginal cost if you are willing to assume that there is an it2|] chance of elasticity being -2 or -3. {3} {b} Suppose competition between 1your rm and the pharma CDIPi-lf drives the price down to the marginal cost of the highcost Producer. WDuld you make money at this price? How would 1you respond to the University? [4}