Suppose you are the manager of drug development at a new pharmaceutical company and you are trying to decide how to price your newly released drug.The drug has a marginal cost of $20 and the demand elasticity for the drug is -2.What is the optimal price?

Question

Quizplus · Accepted Answer

The Answer is Price = MC/(1 + 1/-Pe)= $20/(1 + 1/-2)= $20/(1 - .5)= $20/.5 = $40 or 2 times MC

Suppose You Are the Manager of Drug Development at a New