The Cost of Researching and Developing a New Drug Are

question 10

Multiple Choice

The cost of researching and developing a new drug are fixed with respect to the number of units produced. Luna Pharmaceutical would like to sell drugs to poor countries "at cost." Suppose that Luna is subject to the fixed cost fallacy and calculates the cost of the drugs as the average cost, which includes the average fixed cost. What is a consequence of the fallacy?

• A) Luna would under-price the drugs to poor countries.
• B) Luna would over-price the drugs to poor countries.
• C) Luna should price according to the marginal cost.
• D) None of the above.

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Definitions:

Relations-Oriented

A focus or preference towards building and maintaining positive interpersonal relationships in a work environment or leadership context.

Self-Oriented

Focused on one's own interests, needs, or desires, often at the exclusion of others' considerations.

Team Members

Individuals who are part of a group collaborating towards a common goal, each contributing their unique skills and efforts.

Team Effectiveness

The degree to which a team is able to meet its objectives and achieve desired outcomes efficiently and effectively, often influenced by factors such as communication, coordination, and goal alignment.