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1. (10 points) Mylan has a lock on the particular EpiPen design for delivering epinephrine for allergy attacks that millions of patients, parents, and school nurses have come to trust. The company’s main innovation has been a bright orange cap that covers the needle, but releases automatically when a patient pushes an EpiPen against her thigh, so there’s no need to stop and unscrew the cover in the midst of an allergy attack. The EpiPen has been dominant for so long it makes it hard for challengers to come in with a radically different design. It would not be very difficult to create an EpiPen product, in terms of engineering,” a potential competitor said. “It’s not rocket science. It’s purely the patent that stops us. Mylan has patent protection that lasts through 2025.
a. Using the following Market Demand and Cost information for Mylan, use the Structure-Conduct-Performance paradigm to analyze the industry for getting epinephrine into the body. Find, Price, Quantity and Profit
P=1,000-Q
MR=1,000-2Q
MC=100
b. Using following the Market Demand and cost information, use the Structure-Conduct-Performance paradigm to analyze the industry once Mylan’s patent expires in 2025. Note, in a competitive industry P=MR. Find Price, Quantity and Profit
P=1,000-Q
MC=100
2.(10 points) Supply and Demand
Multiple reasons have been forwarded as to why gasoline prices are currently rising to unprecedented levels. Provide two separate explanations for this price increase using shifts in supply or demand. What one piece of information would allow you to decide which of the two is a better explanations?
3.(10 Points) Economies of Scale
Suppose the cost for each firm in an industry is given by TC=1000+10Q. Suppose the entire market in the industry is Q=1,000. Would a firm with a 50% market share have any cost advantage over a firm with just a 20% market share? What would the break-even price be for each firm?
4.(10 Points) Strategy
Briefly explain the company you work(ed) for and what it does. What strategy is your company following (try to classify it into one of the three strategies in the text)? How is your strategy working—how long will it allow you to maintain a competitive advantage?