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Instructions In this assignment, you are to prepare a report analyzing the two problems below. Be sure to include your own interpretation and opinion as
Instructions In this assignment, you are to prepare a report analyzing the two problems below. Be sure to include your own interpretation and opinion as you prepare this report. 1. You are the manager of a small pharmaceutical company that received a patent on a new drug three years ago. Despite strong sales [$150 million last year} and a low marginal cost of producing the product [$0.50 per pill), your company has yet to sh ow a prot from selling the drug. This is, in part, due to the fact that the company spent $1.7 billion developing the drug and obtaining FDA approval. 0 Discuss why this rm is currently not making a prot. Include the concepts of total revenue, variable costs, xed costs, and sunk cost. 0 Explain the relationship between total revenue and own price elasticity of demand. 0 Based on this information, what can you do to boost prots? 2. The pharmaceutical industry operates in an aggressively competitive market. There are a limited number of rms in the industry. This is due primarily to the high xed cost of entering the market, the high cost of research and development. obtaining patents, and dealing with mergers and acquisitions. Let us assume that over 70% of the products sold in this market are protected by patents for the next eight years. 0 Identify and describe the market characteristics of perfect competition. 0 Explain price competition in perfect competition. 0 Explain the barriers to entry in perfect competition. 0 Does this pharmaceutical industry conform to an economist's denition of a perfectly competitive market? Justify your response
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