Question

When a pharmaceutical company introduces a new drug, its research and development costs are ______, and the cost of the chemicals used in manufacturing the drug are ______. Multiple Choice

start-up costs;
fixed costs fixed costs;
start-up costs start-up costs;
variable costs marginal costs;
variable costs

Answer 1

Start-up cost; variable cost

Step-by-step explanation:

Start-up cost is the cost incurred in developing a new product. It is a one time cost that is incurred only at the time of creating something new. Start-up cost includes borrowing cost, research and development cost and expenses incurred on technology.

Variable costs change with the change in units of output produced. Cost of chemicals depend on the amount of drugs produced. So, research and development cost is start-up cost and cost of chemical is variable cost.