Suppose That Two Drug Manufacturers Represent the Only Two Producers

question 115

Multiple Choice

Suppose that two drug manufacturers represent the only two producers in the industry and further suppose that the companies can spend a lot of money on research to develop new drug treatment.If only one develops a product, they make very high profits, but if they produce similar drugs, their profits are lower given the high research costs and they split the market for their products.But if they both sell their current products and spend little on research, they can still make good profits.The best outcome that they could achieve would be for the two firms to

• A)ignore each other's behavior.
• B)always conduct research activities.
• C)form a cartel.
• D)reach a Nash equilibrium.

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