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In 1996, the drug Prilosec became the best-selling anti-ulcer drug in the world. Given the fact that the drug was the most effective among all other competing drugs, managers at Prilosec initially set price at a 400 percent markup over cost in order to boost profits. Prilosec’s marginal cost (production and packaging) was only about $0.60 per daily dose.
A. What price did the managers set in order to maintain the 400 percent markup on cost? Show your calculations.
B. If price elasticity of Prilosec drug was around -1.5, did the markup of 400 percent follow the profit maximizing rule? Explain with calculations.
The average price of red stubble is about $8 per kilo also the fisher people's revenues for catching red stubble immediately cover their costs.
Consider an investor with preferences given by the utility function U = E(r) – 0.5Aσ2 and there are two portfolios with the following characteristics: Portfolio A Portfolio B E(r) = 0.06 E(r) = 0.10 σ = 0.07 σ = 0.17 (a) suppose that the investor has..
Two power plants are currently emitting 8,000 tons of pollution each (for a total of 1,600 tons). Pollution reduction costs for Plant 1 are given by MCR(1)=.02Q and for Plant 2 by MCR(2)=.03Q, where Q represents the number of tons of pollution reduct..
Two hundred paper mills compete in the paper market. The total cost of production (in dollars) for each mill is given by the formula TC = 500Qmill + (Qmill) 2 where Qmill indicates the mills annual production in thousands of tons. The marginal cost o..
Discuss contributions of competing and dominant school of thought to evolution of labour economics; mention paradigm differences and distinctions between old labour economics and new labour economics.
The incidence of a payroll tax is borne by both employers and employees. MRP represents what the marginal physical product is worth. If the MRP of labor is below the wage rate, the firm should lay off workers.
Would you expect deviations from the law of one price between the United States and Mexico to have risen or fallen over the past two decades? Explain your answer carefully, providing details on the types of goods and services which you believe would ..
Define the term "innovation." What is innovation anyway? Is it the same as New Product Development?
Suppose a public referendum is being held on whether or not to levy a tax on cigarettes. Currently, the supply of cigarettes is given by Qs = -120 + 28P. You estimate the demand for cigarettes to be Qd = 200 - 4P. What is the price elasticity of dema..
An amusement park faces large fixed costs of $500,000 per month and low average variable costs of $10 per visitor. It charges all visitors a flat entry fee of $50 for unlimited rides. The park currently has 42,000 visitors a month and proposes to rai..
When the American Telephone and Telegraph Company (AT&T) was recently building a new, multistory complex in downtown Kansas City, the work site was probably inspected for hazardous conditions by personnel from the
Globalization has depressed wages in western industrialized countries, particularly those for
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