PROBLEM 1:

Firm

Market share

A

40%

B

25%

C

10%

D

10%

E

10%

F

5%

1. In the table above, the four-firm concentration ratio is:

a) 40%.

b) 65%.

c) 85%

d) 100%.

1. In the table above, the HHI index is:

PROBLEM 2:

Research

Protected

Expired

1

2

3

4

5

6

Cost

140

190

15

15

20

20

Revenue

0

0

210

160

120

70

1. Consider the table above, depicting the stages of development for a new drug. Using equation (17.4), if the discount rate is 0.12, is the drug marketable?

Equation 17.4: Sumation (Rt-Ct)/(1+r)^t

a) NPV = +36.55; the drug is profitable and should be marketed.

b) NPV = +36.55; the drug has a positive net present value, but it is not high enough to market.

c) Total costs are 400 and total revenues are 560; the drug should be marketed.

d) There is not enough information.

4. Consider the table above, depicting the stages of development for a new drug. Using equation 17.4, if the discount rate is10, is the drug marketable?