CareRight Medical Company has invented and received a patent for a new drug to treat a rare and fatal disease. It charges $5,000 for a year’s supply of the drug. Critics claim that this amount is excessive, as it does not cost that much to produce. They believe the company is taking advantage of sick people. CareRight responds that they are losing money on this drug. The critics are right: It does not cost CareRight $5,000 to produce a year’s supply for one person. However, CareRight’s statement is also correct in that they are losing money on the drug. How can both statements be true? Consider the different types of costs in your answer.

CareRight Medical Company has invented and received a patent for a new drug to treat a rare and fatal disease. It charges $5,000 for a year’s supply of the drug. Critics claim that this amount is excessive, as it does not cost that much to produce. They believe the company is taking advantage of sick people. CareRight responds that they are losing money on this drug. The critics are right: It does not cost CareRight $5,000 to produce a year’s supply for one person. However, CareRight’s statement is also correct in that they are losing money on the drug. How can both statements be true? Consider the different types of costs in your answer.

EBK HEALTH ECONOMICS AND POLICY

7th Edition

ISBN:9781337668279

Author:Henderson

Publisher:Henderson

Chapter11: The Market For Pharmaceuticals

Section: Chapter Questions

Problem 1QAP

See similar textbooks

Similar questions

Andrea’s Day Spa began to offer a relaxing aromatherapy treatment. The firm asks you how much to charge to maximize profits. The first two columns in the table below provide the price and quantity for the demand curve for treatments. The fifth column shows its total costs. Complete the table. What is the profit-maximizing level of output for the treatments and how much will the firm earn in profits? Price Quantity Total Revenue Marginal Revenue Total Cost Marginal Cost $25 0 $0 N/A $130 N/A $24 10 $275 $23 20 $435 $22.50 30 $610 $22 40 $800 $21.60 50 $1005 $21.20 60 $1225
Define technology difusion in short.
Which drug type is expected to have a higher markup over cost? Brand name drugs Both have about the same markup Generic drugs
The below table shows the total revenues and total cost of running a pharmacy.
How can healthcare systems address the inelastic demand for emergency care to prevent unchecked and exorbitant pricing for patients?
When the FDA lifted restrictions of TV advertisements for prescription medication in 1997, How has the regulatory affected the market for pharmacuticals?
A medical reported that the consumption of this product has many health benefits Describe how does this would affect the market for the product.
13 2013200 P0004 Suppose that a new drug (A) has been approved to treat a life-threatening disease. The demand for that drug is shown on the accompanying graph by demand curve A Prior to approval of this drug, the only treatment for this condition was any one of several nonprescription, or over the counter, pain relievers. The demand for one brand of the several nonprescription pain relievers is also shown on the graph as demand curve B. Price 75 70 65 % 100 200 300 400 500 Quarsity At a price of $15 (the price at which the two demand curves intersect), the price elasticity of demand for the new drug is for the over-the-counter pain rellever the price elasticity of demand
Suppose you work for Philippine Competition Commission and you find out that in province A, the only two available hospitals are planning to merge, which would result to a monopoly. If you do not allow for merging, hospital 2 will leave the market. Given the following cost functions and the information provided, would you allow for the merging of the two hospitals? Why or why not? Explain intuitively and mathematically. Hospital 1's cost function = 30 + q Hospital 2's cost function = 40 + 92 Joint cost function = 50+q+q2
Price controls decrease the innovation rate for drugs but make existing drugs more affordable. True False
Andrea's Day Spa began to offer a relaxing aromatherapy treatment. The firm asks you how much to charge to maximize profits. The demand curve for the treatments is given by the first two columns in the following table; its total costs are given in the third column. Answer the following question accordingly. Price QuantityTC $25.00 $100 $24.00 10 $250 $23.00 20 $420 $22.00 30 $600 $21.00 40 $780 $20.00 50 $970 $19.00 60 $1,170 The profit maximizing price in the above table is: Select one: a. $21 b. $24 c. $22 d. $25 оооо
Andrea's Day Spa began to offer a relaxing aromatherapy treatment. The firm asks you how much to charge to maximize profits. The demand curve for the treatments is given by the first two columns in the following table; its total costs are given in the third column. Answer the following question accordingly. Price QuantityTC $25.00 $100 $24.00 10 $250 $23.00 20 $420 $22.00 30 $600 $21.00 40 $780 $20.00 50 $970 $19.00 60 $1,170 Total fixed costs in the above table is: Select one: a. $130 b. $10 c. $100 d. Zero