Question: Can you please help me with this question? When explaining please use simple terms. Thank you! ABC Pharmaceuticals has a patent which give it the

Can you please help me with this question? When explaining please use simple terms. Thank you!

ABC Pharmaceuticals has a patent which give it the exclusive right to produce and market a revolutionary new weight loss pill.

A) Assume ABC is making an economic profit. Draw a correctly labeled graph and show the profit maximizing price and quantity.

B) Assume the government imposes a lump sum tax on ABC.

  • what will happen to output and market price? Explain.
  • What will happen to ABC's profits?

C) Assume instead that the government gives a per unit subsidy to ABC for production of this pill.

  • What will happen to output and market price? Explain.
  • What will happen to ABC's profits?

D) Now assume that ABC's patent for the pill expires. What will happen to ABC's economic profits in the long run?

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