Big Drugmakers Just Raised Their Prices Major pharmaceutical companies are raising prescription prices by an average of 4.6 percent this year. President Joe Biden’s plan to combat rising drug prices includes the use of a price cap.

a. What barrier to entry exists in the prescription drug market?

b. How can a price cap on prescription drugs achieve a more efficient outcome?

c. Draw a graph to illustrate the effects of introducing a price cap in the prescription drug market on price, quantity, total surplus, and deadweight loss.