Merck & Co., the manufacturer of the AIDS drug Crixidan, distributes exclusively to one distributor, Stadtlanders Pharmacy. The pharmacy has been criticized for charging too high a price for the drug and exploiting inelastic demand. Stadtlanders claims the charges are ethical because of high staffing costs and associated discounts with various health plans. This situation describes issues associated with which of the following?

Question

Quizplus · Accepted Answer

The situation described in the question pertains to professional services pricing, which is where the price of a product or service is set based on the value provided by the professionals delivering the service. In this case, Stadtlanders Pharmacy is justifying high prices due to high staffing costs and associated discounts with various health plans. This type of pricing strategy is commonly used by professionals such as doctors, lawyers, and accountants.