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# Paradox Revision: A certain pharmaceutical firm recently developed

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Updated on: 09 Jul 2015, 09:01
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A certain pharmaceutical firm recently developed a new medicine, Dendadrine, that provides highly effective treatment of severe stomach disorders that were previously thought to be incurable. However, to develop the new medicine, the company spent nearly \$5 billion in research and development costs. Given the size of the market for Dendadrine and the amount of the initial investment in its development, the company would need to sell Dendadrine at a price that is at least 5 times greater than its variable costs just to break even. Yet the company’s management claims that Dendadrine will soon become the major driver of the firm’s profits. Which of the following statements best reconciles the management’s claim with the evidence on the expenditures associated with the development of Dendadrine?

A. The pharmaceutical firm has been granted a patent to become the sole producer and distributor of Dendadrine, and drugs under patent protection typically sell at prices that are at least 10 times greater than their variable costs.

B. Development of some pharmaceutical products involves substantial initial expenditures on research, testing, and approval.

C. In issues related to personal health, corporate profits should not become the primary consideration.

D. Several other pharmaceutical companies are working on new medicines that may become effective substitutes for Dendadrine.

E. While Dendadrine can be highly effective in treating stomach disorders, it may also result in serious side effects such as dizziness and hallucinations.

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Originally posted by souvik101990 on 05 Mar 2015, 07:14.
Last edited by Harley1980 on 09 Jul 2015, 09:01, edited 1 time in total.
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05 Mar 2015, 07:27
Post Reserved for OE. Kudos for answers and explanations.
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06 Mar 2015, 01:51
A closes the paradox by saying that it may get upto 10 times the cost of manufacturing
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06 Mar 2015, 02:10
souvik101990 wrote:
A certain pharmaceutical firm recently developed a new medicine, Dendadrine, that provides highly effective treatment of severe stomach disorders that were previously thought to be incurable. However, to develop the new medicine, the company spent nearly \$5 billion in research and development costs. Given the size of the market for Dendadrine and the amount of the initial investment in its development, the company would need to sell Dendadrine at a price that is at least 5 times greater than its variable costs just to break even. Yet the company’s management claims that Dendadrine will soon become the major driver of the firm’s profits. Which of the following statements best reconciles the management’s claim with the evidence on the expenditures associated with the development of Dendadrine?

A. The pharmaceutical firm has been granted a patent to become the sole producer and distributor of Dendadrine, and drugs under patent protection typically sell at prices that are at least 10 times greater than their variable costs.

B. Development of some pharmaceutical products involves substantial initial expenditures on research, testing, and approval.

C. In issues related to personal health, corporate profits should not become the primary consideration.

D. Several other pharmaceutical companies are working on new medicines that may become effective substitutes for Dendadrine.

E. While Dendadrine can be highly effective in treating stomach disorders, it may also result in serious side effects such as dizziness and hallucinations.

A. The pharmaceutical firm has been granted a patent to become the sole producer and distributor of Dendadrine, and drugs under patent protection typically sell at prices that are at least 10 times greater than their variable costs. since the company requires atleast 5 times the available medicines to break even , this choice gives us reason to believe that the medicine would sell for the price that will give profit correct

B. Development of some pharmaceutical products involves substantial initial expenditures on research, testing, and approval.
out of scope.. does not prove anything

C. In issues related to personal health, corporate profits should not become the primary consideration.
again out of scope ..we are not dealing with social behaviour

D. Several other pharmaceutical companies are working on new medicines that may become effective substitutes for Dendadrine.
this would only weaken the arguement by providing alternative

E. While Dendadrine can be highly effective in treating stomach disorders, it may also result in serious side effects such as dizziness and hallucinations.
out of scope... side effects are not an issue , profit is...
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06 Mar 2015, 05:47
souvik101990 wrote:
A certain pharmaceutical firm recently developed a new medicine, Dendadrine, that provides highly effective treatment of severe stomach disorders that were previously thought to be incurable. However, to develop the new medicine, the company spent nearly \$5 billion in research and development costs. Given the size of the market for Dendadrine and the amount of the initial investment in its development, the company would need to sell Dendadrine at a price that is at least 5 times greater than its variable costs just to break even. Yet the company’s management claims that Dendadrine will soon become the major driver of the firm’s profits. Which of the following statements best reconciles the management’s claim with the evidence on the expenditures associated with the development of Dendadrine?

A. The pharmaceutical firm has been granted a patent to become the sole producer and distributor of Dendadrine, and drugs under patent protection typically sell at prices that are at least 10 times greater than their variable costs.

B. Development of some pharmaceutical products involves substantial initial expenditures on research, testing, and approval.

C. In issues related to personal health, corporate profits should not become the primary consideration.

D. Several other pharmaceutical companies are working on new medicines that may become effective substitutes for Dendadrine.

E. While Dendadrine can be highly effective in treating stomach disorders, it may also result in serious side effects such as dizziness and hallucinations.

+1 for A which says that the the firm can sell the drug at 10 times the variable cost.
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07 Mar 2015, 01:36
souvik101990 wrote:
A certain pharmaceutical firm recently developed a new medicine, Dendadrine, that provides highly effective treatment of severe stomach disorders that were previously thought to be incurable. However, to develop the new medicine, the company spent nearly \$5 billion in research and development costs. Given the size of the market for Dendadrine and the amount of the initial investment in its development, the company would need to sell Dendadrine at a price that is at least 5 times greater than its variable costs just to break even. Yet the company’s management claims that Dendadrine will soon become the major driver of the firm’s profits. Which of the following statements best reconciles the management’s claim with the evidence on the expenditures associated with the development of Dendadrine?

A. The pharmaceutical firm has been granted a patent to become the sole producer and distributor of Dendadrine, and drugs under patent protection typically sell at prices that are at least 10 times greater than their variable costs.

B. Development of some pharmaceutical products involves substantial initial expenditures on research, testing, and approval.

C. In issues related to personal health, corporate profits should not become the primary consideration.

D. Several other pharmaceutical companies are working on new medicines that may become effective substitutes for Dendadrine.

E. While Dendadrine can be highly effective in treating stomach disorders, it may also result in serious side effects such as dizziness and hallucinations.

A. The pharmaceutical firm has been granted a patent to become the sole producer and distributor of Dendadrine, and drugs under patent protection typically sell at prices that are at least 10 times greater than their variable costs. --Looks very promising , as mentioned in paragraph the stomach pain is Incurable as of now , if the patent (monopoly) allows to sell till 10X and Firm needs only 5X to breakeven that clearly signifies that they are selling it on very reasonable price . we will keep this option .

B. Development of some pharmaceutical products involves substantial initial expenditures on research, testing, and approval.
'some' drugs take substantial initial expenditure , how does that help to add support for management's claim that 'Dendadrine will soon become the major driver of the firm’s profits' .

C. In issues related to personal health, corporate profits should not become the primary consideration.
ohh..this is straight out, take this one out and throw it somewhere . we are taking about general public usage , the drug is not targeted only for corporates.

D. Several other pharmaceutical companies are working on new medicines that may become effective substitutes for Dendadrine.
this is a possible weakener.

E. While Dendadrine can be highly effective in treating stomach disorders, it may also result in serious side effects such as dizziness and hallucinations.
Again this is a weakener , however since these side effects are already known , chances are there the the manufacturing firm will add a word of caution on the cover.

A is by far teh best answer choice.

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12 Mar 2015, 13:01
A. The pharmaceutical firm has been granted a patent to become the sole producer and distributor of Dendadrine, and drugs under patent protection typically sell at prices that are at least 10 times greater than their variable costs.CIf firm acquires patent and becomes sole producer and distributor of Dendarine, then people are going to buy only this medicine for curing stomach disorder, and selling at 10 times the costs (more than the break even requirement) it will attain profit

B. Development of some pharmaceutical products involves substantial initial expenditures on research, testing, and approval.Irrelevent to ascertain Profits made

C. In issues related to personal health, corporate profits should not become the primary consideration.Incorrect. The question states company has to make profit.

D. Several other pharmaceutical companies are working on new medicines that may become effective substitutes for Dendadrine.Incorrect. Weakens the arguement.If other companies are working on same type of medicine, it will divide the customers among all makers and hence lower the profit of company

E. While Dendadrine can be highly effective in treating stomach disorders, it may also result in serious side effects such as dizziness and hallucinations.Irrelevent information. No reference to Profit
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27 Apr 2015, 06:34
souvik101990 wrote:
A certain pharmaceutical firm recently developed a new medicine, Dendadrine, that provides highly effective treatment of severe stomach disorders that were previously thought to be incurable. However, to develop the new medicine, the company spent nearly \$5 billion in research and development costs. Given the size of the market for Dendadrine and the amount of the initial investment in its development, the company would need to sell Dendadrine at a price that is at least 5 times greater than its variable costs just to break even. Yet the company’s management claims that Dendadrine will soon become the major driver of the firm’s profits. Which of the following statements best reconciles the management’s claim with the evidence on the expenditures associated with the development of Dendadrine?

A. The pharmaceutical firm has been granted a patent to become the sole producer and distributor of Dendadrine, and drugs under patent protection typically sell at prices that are at least 10 times greater than their variable costs.

B. Development of some pharmaceutical products involves substantial initial expenditures on research, testing, and approval.

C. In issues related to personal health, corporate profits should not become the primary consideration.

D. Several other pharmaceutical companies are working on new medicines that may become effective substitutes for Dendadrine.

E. While Dendadrine can be highly effective in treating stomach disorders, it may also result in serious side effects such as dizziness and hallucinations.

Option A .A tells how the company will gain profits.
A is indeed the correct one.OA please
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15 Jun 2015, 05:30
souvik101990 wrote:
A certain pharmaceutical firm recently developed a new medicine, Dendadrine, that provides highly effective treatment of severe stomach disorders that were previously thought to be incurable. However, to develop the new medicine, the company spent nearly \$5 billion in research and development costs. Given the size of the market for Dendadrine and the amount of the initial investment in its development, the company would need to sell Dendadrine at a price that is at least 5 times greater than its variable costs just to break even. Yet the company’s management claims that Dendadrine will soon become the major driver of the firm’s profits. Which of the following statements best reconciles the management’s claim with the evidence on the expenditures associated with the development of Dendadrine?

A. The pharmaceutical firm has been granted a patent to become the sole producer and distributor of Dendadrine, and drugs under patent protection typically sell at prices that are at least 10 times greater than their variable costs.

B. Development of some pharmaceutical products involves substantial initial expenditures on research, testing, and approval.

C. In issues related to personal health, corporate profits should not become the primary consideration.

D. Several other pharmaceutical companies are working on new medicines that may become effective substitutes for Dendadrine.

E. While Dendadrine can be highly effective in treating stomach disorders, it may also result in serious side effects such as dizziness and hallucinations.

Are we sure that this is a 700+ level question? And I think the OA is A as well.
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15 Jun 2015, 06:06
souvik101990 wrote:
A certain pharmaceutical firm recently developed a new medicine, Dendadrine, that provides highly effective treatment of severe stomach disorders that were previously thought to be incurable. However, to develop the new medicine, the company spent nearly \$5 billion in research and development costs. Given the size of the market for Dendadrine and the amount of the initial investment in its development, the company would need to sell Dendadrine at a price that is at least 5 times greater than its variable costs just to break even. Yet the company’s management claims that Dendadrine will soon become the major driver of the firm’s profits. Which of the following statements best reconciles the management’s claim with the evidence on the expenditures associated with the development of Dendadrine?

A. The pharmaceutical firm has been granted a patent to become the sole producer and distributor of Dendadrine, and drugs under patent protection typically sell at prices that are at least 10 times greater than their variable costs.

B. Development of some pharmaceutical products involves substantial initial expenditures on research, testing, and approval.

C. In issues related to personal health, corporate profits should not become the primary consideration.

D. Several other pharmaceutical companies are working on new medicines that may become effective substitutes for Dendadrine.

E. While Dendadrine can be highly effective in treating stomach disorders, it may also result in serious side effects such as dizziness and hallucinations.

will go with Option A.
This is the only choice which shows how Dendadrine helps in improving company's profits.
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15 Jun 2015, 06:19
A. The pharmaceutical firm has been granted a patent to become the sole producer and distributor of Dendadrine, and drugs under patent protection typically sell at prices that are at least 10 times greater than their variable costs.
If this is true, the firm would be able to sell Dendadrine at more than 5 times their variable costs.

B. Development of some pharmaceutical products involves substantial initial expenditures on research, testing, and approval.
Even if they involve substantial expenditures, how does that result in higher profits?

C. In issues related to personal health, corporate profits should not become the primary consideration.
If they should not be the primary consideration, how does that result in higher profits?

D. Several other pharmaceutical companies are working on new medicines that may become effective substitutes for Dendadrine.
If this statement is true, there would be more supply for Dendadrine, which would lower the price of it, resulting in lower profits.

E. While Dendadrine can be highly effective in treating stomach disorders, it may also result in serious side effects such as dizziness and hallucinations.
Does not result in higher profits - may actually decrease profits due to decreasing demand because of the side effects.

I also choose A.
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15 Jun 2015, 19:39
Which of the following statements best reconciles the management’s claim with the evidence on the expenditures associated with the development of Dendadrine?

A. The pharmaceutical firm has been granted a patent to become the sole producer and distributor of Dendadrine, and drugs under patent protection typically sell at prices that are at least 10 times greater than their variable costs.Correct answer. Ownership of Patent grants an exclusive right to produce a product. Thus, Patent gives a near-monopoly position in the market which may allow the Management to make high profits.

B. Development of some pharmaceutical products involves substantial initial expenditures on research, testing, and approval. Has no implication or relevance for Management's claim of making high profits.

C. In issues related to personal health, corporate profits should not become the primary consideration. Going contrary to discussion.

D. Several other pharmaceutical companies are working on new medicines that may become effective substitutes for Dendadrine. Weakens the argument by bringing in a substitute of Dendadrine implying a possible wake economic power with this Management.

E. While Dendadrine can be highly effective in treating stomach disorders, it may also result in serious side effects such as dizziness and hallucinations.Weakens the argument by referring to a possible scale down of its market.
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15 Jun 2015, 19:48
souvik101990 wrote:
Post Reserved for OE. Kudos for answers and explanations.

Firstly want to know is this a 700 level Q.????
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08 Jul 2015, 16:49
IMO A it is
All other answer choices are vague
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09 Apr 2016, 12:36
options b,c and e are totally out of scope choices.choice d is somewhat offtopic. Therefore correct answer is option A
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06 Feb 2017, 04:49
The argument provides information about the substantial costs associated with the development of Dendadrine. Yet the management views Dendadrine as a highly profitable project. In order to reconcile these claims, we need to demonstrate that the drug will be able to generate profits that will more than compensate for the high initial expenditures associated with its development.
(A) CORRECT. This statement demonstrates that the patent protection is likely to allow the pharmaceutical company to charge the unusually high prices that will more than compensate for the initial research and development costs. Note that the patent protection is likely to result in prices that are at least double the level necessary for the company to recoup its costs, thus leading to substantial profits.
(B) This answer tells us that for some pharmaceutical products, high R&D expenditures are quite typical. While this explains the high costs associated with the development of Dendadrine, it tells us nothing about how well such products do on the market and whether they subsequently become profitable.
(C) This statement makes an emotionally-charged claim about the irrelevance of corporate profits in health-related issues and provides no information that would explain how the pharmaceutical company would be able to make profits on Dendadrine.
(D) This statement would actually reduce the likelihood that the company will be able to make profits on Dendadrine, since the presence of similar products would likely reduce the market share of the firm and put downward pressure on prices.
(E) This statement does not provide information on how the company can make profits on Dendadrine despite the high costs and side effects. In fact, the presence of side effects is likely to reduce rather than increase the profit potential
of a drug.
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24 Aug 2019, 23:50
A certain pharmaceutical firm recently developed a new medicine, Dendadrine, that provides highly effective treatment of severe stomach disorders that were previously thought to be incurable. However, to develop the new medicine, the company spent nearly \$5 billion in research and development costs. Given the size of the market for Dendadrine and the amount of the initial investment in its development, the company would need to sell Dendadrine at a price that is at least 5 times greater than its variable costs just to break even. Yet the company’s management claims that Dendadrine will soon become the major driver of the firm’s profits. Which of the following statements best reconciles the management’s claim with the evidence on the expenditures associated with the development of Dendadrine?

A. The pharmaceutical firm has been granted a patent to become the sole producer and distributor of Dendadrine, and drugs under patent protection typically sell at prices that are at least 10 times greater than their variable costs. - Correct. Since it says the patent will aloow the company to charge ten time greater than the variable costs and it given that the company "would need to sell Dendadrine at a price that is at least 5 times greater than its variable costs just to break even" , the comapny would be able to recover the costs and drive profits

B. Development of some pharmaceutical products involves substantial initial expenditures on research, testing, and approval.Incorrect - Not relevant

C. In issues related to personal health, corporate profits should not become the primary consideration..Incorrect - Out of scope

D. Several other pharmaceutical companies are working on new medicines that may become effective substitutes for Dendadrine. - This weakens managemnet decison - Incorrect

E. While Dendadrine can be highly effective in treating stomach disorders, it may also result in serious side effects such as dizziness and hallucinations.- .Incorrect - Not relevant
Re: Paradox Revision: A certain pharmaceutical firm recently developed   [#permalink] 24 Aug 2019, 23:50
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