The Drug and Food Administration (FDA) just gave you the approval to sell your new patented drug which reduces aches and pains associated with doing IO homework. Suppose you spent ten years and $1.5 billion to market this drug under brand name eazIO. Market research indicates that price elasticity of demand for eazIO is constant along the relevant portion of demand curve and is -1.15. You calculate the marginal cost of selling and manufacturing one additions does of eazIO is $2.
1. Determine the profit-maximizing price per dose?
2. Would you expect elasticity of demand you face for eazIO to rise or fall when your patent expires?