Name Brand Drugs Are Able to Continue Capitalizing on Their

question 221

Multiple Choice

Name brand drugs are able to continue capitalizing on their market power even after generic drugs enter the market because
(i) almost all people fear the generic drug companies are devoting too few resources to research and development.
(ii) some people fear that generic drugs are inferior.
(iii) some people are loyal to the name brand.

• A)(i) and (ii) only
• B)(ii) and (iii) only
• C)(i) and (iii) only
• D)(i), (ii), and (iii)

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Definitions:

Corporate Hierarchy

A structure in corporations that defines the levels of authority, roles, and responsibilities from top management to lower-level employees.

Natural Monopoly

A natural monopoly occurs when a single firm can supply the entire market at a lower cost than could be achieved by multiple firms due to economies of scale.

Economies of Scale

The cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output.

Imperfect Competitors

Firms or entities in a market structure where they have some control over the price of their products, due to lack of perfect competition.