What is the reason why the drug industry is likely to show increasing returns?
A) when upfront costs are high and marginal costs are low, unit costs drop as volume increases
B) network externalities allow the company to lower prices and sell more
C) due to a steep learning curve, as a firm produces more, its costs decrease
D) all of the above

Question

Quizplus · Accepted Answer

In the drug industry, high upfront costs for research and development and low marginal costs for production mean that as production volume increases, the average cost per unit decreases, leading to increasing returns.

What Is the Reason Why the Drug Industry Is Likely