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Suppose a drug developer just received a patent on a new chemical compound, which could be used in developing a new drug to control cholesterol. The developer knows (with certainty) that it could successfully develop the compound into a safe, effective (and FDA-approved) drug. If it does so, it can expect to earn a profit of $150 million per year from sales of the drug while the drug is under patent. Assume the firm has a 10% discount rate.
a) If developing the new drug will take 14 years, what is the maximum the drug developer should be willing to invest to develop the new drug? Assume the entire R&D investment must be made in year 1. (That is, if the firm invests $C in year 1, they stand to earn $150m annually from year 15 through year 20. Your job is to calculate C.)
b) If developing the new drug will take 12 years, what is the maximum the drug developer should be willing to invest to develop the new drug?
c) Observers often criticize the FDA's slow process for approving new drugs. Identify two problems that are created if the drug approval process is unnecessarily slow.
In China, it takes 100 hours to produce 1 digital camera or 4 hours to produce 1 lb. of wheat. In S. Korea, it takes 60 hours to produce 1 digital camera or 3 hours to produce 1 lb. of wheat. What is China's opportunity cost of producing one pound of..
For what values of a is he risk averse, risk neutral, and risk loving? From now on, assume that a = 1/2. Johnny owns a house that would cost $100,000 to replace should it ever be destroyed by fire.
Scientists have developed a bacteria that they believe will lower the freezing point of agricultural products. This innovation could save farmers $1 billion a year in crops now lost to frost damage. If this technology becomes widely used, what wil..
compute the standard error of estimate and the standard error of the coefficient for the following data set: X = 95, 85, 80, 70, 60 and Y = 85, 95, 70, 65, 70. Lastly, set up and perform the hypothesis test to determine if a student's aptitude sco..
In fact, he has operated this livestock operation for over 20 years. in the past, his farm was fairly isolated. however more recently the nearest city, woodpile, has been expanding. thus, there are now residential homes fairly close to Brain's far..
What term would economists use to describe what happened in year 3 Expansion OR Recession If the growth rate in year 3 had been a positive 5 percent rather than a negative 2 percent, what would have been the average growth rate
The marginal cost (which equals the average variable cost) of serving an additional patron, either senior or everyone else, is equal to $4. Fixed costs are equal to $1000.Ps = 80 - Qs Pe = 100 - 2Qe Show that MRe = MRs = MC
Corporations often distribute profits to their shareholders in the form of dividends, which are simply checks mailed out to shareholders. Suppose that you have the chance to buy a share in a fashion company called Rogue Designs for $35.
Mehnaz has already made arrangements for her birthday celebration: she is inviting her 7 friends to a dinner party at a famous Montreal restaurant. The estimated cost of this dinner includes $55 per person for the 3 course meal, as well as 4 bott..
The economic analysis division of Mapco Industries has estimated the demand function for its lone of weed trimmers to be : Qd=18,000+0.4N-350Pm+90Ps where N=number of new homes completed in the primary market area Pm=price of the mapco trimmer.
Alex is willing to pay $10, and Bella is willing to pay $8, for 1 pound of ribeye steak. When the price of ribeye steak increases from $9 to $11, Answer Alex experiences a decrease in consumer surplus, but Bella does not.
Scores of high school students on a national mathematics exam in Egypt were normally distributed with a mean of 86 and a standard deviation of 4.
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