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Pharm mon to perfect
1. Bellringer Slates
1. What sort of demand do lifesaving
pharmaceuticals have?
2. Assume a firm has a patent on the
cure for cancer, what would the graph
look like according to our theory of
the firm? Label DWL also.
3. Do you think this firm should be
allowed to charge any price it wants?
Explain
4. How would quantity supplied change
if that firm price discriminated?
3. CASE STUDY: Monopoly vs. Generic Drugs
Patents on new drugs
give a temporary
monopoly to the seller.
When the
patent expires,
the market
becomes competitive,
generics appear.
MC
Quantity
Price
D
MR
PM
QM
PC =
QC
The market for
a typical drug
4. Other similar markets?
• Move from monopoly to
perfect competition
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esources/publicdomain.cfm
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• Books, music, etc