. Going off Patent. Consider the producer of a branded drug that will soon go off patent and compete with generic versions of the drug. The average cost of production is constant at $8 per dose. The...

. Going off Patent. Consider the producer of a branded drug that will soon go off patent and compete with generic versions of the drug. The average cost of production is constant at $8 per dose. The producer could prevent the entry of generics by committing to a limit price of $10. At this price, the firm will sell 100 doses per day. Alternatively, the producer could charge a price of $12 and passively allow generics to enter the market. The price elasticity of demand for the branded drug is 2.0.

a. Under the passive approach (price = $12), the quantity of the branded drug demanded is ; the firm’s profit is
  .

b. Under the entry-deterrence approach, the firm’s profit is $
.

c. The best approach is
  (entry deterrence, passive). d. If the price elasticity of demand for the branded drug were 3.0 instead of 2.0, the profit under the passive approach would be $ , so the best strategy is
 (entry deterrence, passive).