Suppose that Luna's patent on a drug has expired and generic manufacturers now produce cheaper versions. The demand has become more price elastic. How should Luna adjust the price?
A) Reduce the price.
B) Increase the price.
C) Reduce the price according to the new marginal revenue and marginal cost.
D) Increase the price according to the new marginal revenue and marginal cost.

Question

Quizplus · Accepted Answer

When demand becomes more price elastic, Luna should reduce the price to align with the new marginal revenue and marginal cost, as consumers are more sensitive to price changes.

Suppose That Luna's Patent on a Drug Has Expired and Generic