1. When a pharmaceutical company develops a new drug, it often receives patent protection for that medication, allowing it to charge a higher price. Explain how this public policy of providing patent protection might help align the corporation's interests with society's interests.
A. Without patent protection, drug manufacturers would be less willing to spend as much on R&D to develop new drugs and drug innovation would be curtailed.
B. Without patent protection, the developer of the drug would be forced to lower prices to compete with generic manufacturers.
C. Without patent protection, the developer of the drug would be forced to raise prices to compete with generic manufacturers.
D. It is in our interest as a society that new and improved drugs be developed, despite the fact that the development and testing process can be a very expensive and lengthy process.
2. Consider a company like Boeing Aircraft: enormous factories, giant machines, huge investments in steel, glass, aluminum. How does that description influence Boeing's capital structure?