When Generic Drugs Enter the Market After the Patent for a Brand

question 55

Multiple Choice

When generic drugs enter the market after the patent for a brand name drug expires,the price of the brand name drug often increases.This is usually due to

• A) the demand curve for the brand name drug shifting in but becoming more inelastic.
• B) the demand curve for the brand name drug not shifting, but the marginal cost of producing the good increases.
• C) the demand curve for the brand name drug shifting in but becoming more elastic.
• D) the demand curve for the brand name drug not shifting, but loyal customers are willing to pay a higher price for the brand name drug.

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Definitions:

Direct Labor Hours

The total hours worked directly on producing goods, an important factor in costing and efficiency analyses.

Factory Overhead

All indirect costs associated with manufacturing a product, including utilities, maintenance, and salaries of non-direct labor.

Total Factory Overhead

Total factory overhead encompasses all indirect costs associated with manufacturing, including utilities, depreciation, and salaries for supervisory personnel, that cannot be directly traced to specific products.

Activities Per Product

The specific tasks or operations that need to be completed in order to produce each unit of a product.