VetPharm has historically produced and sold drugs for animals; however, one of i

Question

VetPharm has historically produced and sold drugs for animals; however, one of its products developed for animal use has recently been approved for a similar use in humans. Market research has revealed that at the current per dose price, the elasticity on the part of animal owners is -2.0. The research also estimates that at this price the elasticity of demand for human use would be -0.2. The current price is $5.00 per dose. If the MC of production is $1.00, what should the company do? a. reduce animal price; reduce human price. b. raise animal price; raise human price. c. reduce animal price; raise human price. d. raise animal price; reduce human price.

Explanation / Answer

Hi, If you like my answer rate me first...that way only I can earn points. Thanks Since, the elasticity on the part of animal owners is -2.0, it should reduce the price and price the elasticity of demand for human use is -0.2, so it should increase the price, in order to increase total revenue. so, option c. reduce animal price; raise human

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