AB Pharmaceutical Announced FDA Approval for a New Drug on October

question 51

Multiple Choice

A.B. Pharmaceutical announced FDA approval for a new drug on October 12. Uptown Drug Co. announced FDA approval for its new drug on October 14. No other information was released that would affect returns over this time period. What is the combined cumulative abnormal return for the 5 day period commencing 2 days prior to the FDA approval announcement date? Use the following data to answer this question. No trading occurred on October 15 or 16.

• A) 0.6 percent
• B) 1.0 percent
• C) 1.2 percent
• D) 1.3 percent
• E) 1.6 percent

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Definitions:

Increasing Opportunity Costs

The principle that the more a society tries to produce of a specific good, the higher the opportunity cost of further increasing its production.

Production Possibilities Curves

A curve depicting all maximum output possibilities for two goods, given a set of inputs, highlighting the trade-offs in production choices.

Domestic Supply Curves

Graphical representations of the relationship between the price of a good or service and the quantity of that good or service supplied domestically.

Domestic Demand Curves

Graphical representations showing the quantity of a particular good or service that consumers in a domestic market are willing and able to purchase at various prices.