Pharmaceutical companies typically face very high fixed costs when developing new drugs.The marginal cost of producing a drug after development is very low.When these companies set price and output to maximize profit,patients pay a _____ price for _____ amounts of the drug than are socially optimal.

Question

Quizplus · Accepted Answer

Due to the high fixed costs, pharmaceutical companies tend to charge higher prices for lower amounts of drugs in order to recoup their costs and maximize profits. This results in patients paying a higher price for lower amounts of the drug compared to what would be socially optimal. Therefore, the answer is D, higher price for lower amounts of the drug.

Pharmaceutical Companies Typically Face Very High Fixed Costs When Developing