Your firm spent $100 million developing a new drug. It has now been approved for sale, and each pill costs $1 to manufacture. Your market research suggests that the price elasticity of demand in the general public is -1.1.
What price do you charge the public and what would happen to profits if you charged twice as much. What role does the $100 million in development costs play in your pricing decision. Medicaid agency has made a take it or leave it offer of $2 per pill. Do you accept?