PHARMACEUTICALS: Suppose Pfizer, a major US pharmaceutical company

QUESTION

PHARMACEUTICALS: Suppose Pfizer, a major US pharmaceutical company, produces a new drug that reduces bad cholesterol, XCHOL. The drug has patent protection for 20 years. The development costs were $200 m. The US demand for the drug over this 20 year interval is Q = 100 – 5P, where Q is the quantity of tablets in millions and P is price in $. The cost of production per pill is $4.What price will Pfizer charge for XCHOL in the US in order to maximize profits?

ANSWER:

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