Suppose that if the patent on this particular drug expires, the market would become perfectly competitive,...

  

Transcribed Image Text:

Suppose that if the patent on this particular drug expires, the market would become perfectly competitive, with new firms immediately entering the market with essentially identical products. Further suppose that the original firm will hire lobbyists and make donations to several key politicians to extend its patent for one more year. The firm will be prepared to spend up to $ million to extend its patent. PRICE (Dollars per dose) 10 9 8 7 2 1 0 + 0 2 4 MR MC = ATC 6 8 10 12 14 16 QUANTITY (Millions of doses per year) Demand 18 20 Monopoly Outcome Monopoly Profits Suppose that if the patent on this particular drug expires, the market would become perfectly competitive, with new firms immediately entering the market with essentially identical products. Further suppose that the original firm will hire lobbyists and make donations to several key politicians to extend its patent for one more year. The firm will be prepared to spend up to $ million to extend its patent. PRICE (Dollars per dose) 10 9 8 7 2 1 0 + 0 2 4 MR MC = ATC 6 8 10 12 14 16 QUANTITY (Millions of doses per year) Demand 18 20 Monopoly Outcome Monopoly Profits