Prescott Pharmaceuticals makes a number of generic versions of drugs. When Cymbalta (Duloxetine) lost
its patent, Prescott invested $500,000 to obtain FDA approval and $100,000 to certify one of its production
lines for its production. Production of the drug will cost $2,000,000. Marginal costs for the tablet are $0.10
and they sell for $0.40 per tablet. But many firms have entered and now make Duloxetine causing sales to
fall off. Prescott anticipates that it could use this production line for other drugs losing patent protection
shortly. If forecasted sales are 5 million tablets, what is the breakeven price? Should Prescott discontinue
selling this product?
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