You developed a new drug, TheLorax, and you will be the mono…

You developed a new drug, TheLorax, and you will be the monopolist in the market. Developing the drug cost $844.3 million over the past 6 years. You expect that if you price at $300 you can sell 10,000 units per year and if you price at $100 you can sell about 31,000 units per year. Your marginal cost of production is $0.88. You face a constant elasticity demand curve where the price elasticity of demand is -1.03. 1. What price should you set (round to nearest dollar)? 2. Do you wish to enter?

An established ice cream brand offers a lower price for peop…

An established ice cream brand offers a lower price for people who wear a shirt with the brand logo. An analysis identifies that consumers who persistently do not purchase the ice cream for the regular price do purchase when wearing the logo. Other consumers purchase the product only for the full price. True/False: The brand is successfully price discriminating over time, because it attracts consumers who otherwise wouldn’t have purchased.

In the Pandora case, a higher ad-load leads listeners to red…

In the Pandora case, a higher ad-load leads listeners to reduce their ad-supported listening time. Some listeners leave, some listen less, and some become subscribers. But we lack some numbers on the magnitudes of these effects. So, assume that at the status quo, a 5% increase in ad-load does not change ad-revenue.  True/False: Increasing ad-load by 5% will increase profits.