Scenario: in 2012, the Company Behind the EpiPen Settled a Lawsuit

question 8

Multiple Choice

Scenario: In 2012, the company behind the EpiPen settled a lawsuit by agreeing to allow a generic competitor into the market in 2015, potentially cutting into a big part of its business. The company, Mylan, had already been steadily increasing the price of EpiPen, an injector containing a drug that can save people from life-threatening allergy attacks. After the settlement, it started to raise the price even faster. Now, as Mylan faces growing public furor over its pricing of EpiPen, the company's history of pricing the product highlights a common tactic in the drug industry: sharply raising prices in the years just before a generic competitor reaches the market, as a sort of final attempt to milk big profits from the brand-name drug. Whether the looming generic competition was a motive for the price increases is not entirely clear, because Mylan has declined to answer questions about its thinking. But while the company was once taking two 10 percent price increases a year, it has made two 15 percent increases annually starting in 2014, when the generic competition seemed imminent. Over all, the list price for a pack of two EpiPens is now over $600, up from a little more than $100 in 2007, the year Mylan acquired the product. Most of that increase-a rise to $609 from $265-has come in the last three years. (Source: "Mylan Raised EpiPen's Price Before the Expected Arrival of a Generic," New York Times, August 24, 2016.)
-Refer to the scenario above.Which condition of a perfectly competitive market could most directly be hampered in the market for epinephrine autoinjectors?

• A) Each seller produces a negligible fraction of the total market supply.
• B) Each seller produces an identical good or service.
• C) There is free entry to and exit from the market.
• D) None. The market for the product satisfies all the condition for perfect competition.

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Definitions:

Prairie Voles

A species of rodents known for their monogamous behavior, often used in research to study the biology of social bonding and attachment.

Monogamous

A mating system in which an individual has only one partner during their lifetime or at any one time, creating a strong pair bond.

Selective Forces

Factors in the environment that influence the reproductive success of organisms, driving the process of natural selection and evolutionary change.

Brain Size

The physical volume or mass of the brain, often associated with cognitive abilities and intelligence across different species.