Manager of a small pharmaceutical company

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You are the manager of a small pharmaceutical company that received a patent on a new drug three years ago. Despite strong sales ($175 million last year) and a low marginal cost of producing the product ($0.50 per pill), your company has yet to show a profit from selling the drug. This is, in part, due to the fact that the company spent $1.2 billion developing the drug and obtaining FDA approval. An economist has estimated that, at the current price of $1.50 per pill, the own price elasticity of demand for the drug is -1.5.

Based on this information, what can you do to boost profits?

  • Reduce price.
  • Keep price the same.
  • Raise price.

Reference no: EM131447786

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