Eli Lilly owns the patent to Xigris, which is the only approved drug for the treatment of sepsis. Sepsis is a severe illness caused by a bacterial infection which may lead to the failure of multiple organs. Bayer manufactures aspirin, which is not covered by patent, and is one of the several drugs that relieve the symptoms of the common cold.

a.Which company has relatively more market power, Eli Lilly over treatments for sepsis, or Bayer over drugs for relieving the common cold? Explain.

b.How is the difference between price and marginal revenue related to the price elasticity of demand?

c.Compare the incremental margin percentage at profit maximum for Lilly's Xigris and Bayer's aspirin.