Suppose a firm developed the first drug capable of treating some disease in which no other treatment or cure is available. After which, the firm then acquired a patent for their drug to be the sole producer of the drug for $20$ years. Based upon this information we would like to gain some insights on the market for this new drug. Assume price is above average total cost. After the firm's patent expires and other firms are allowed to produce the drug, what will most likely happen to the price and quantity level for the drug? Why?

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When a firm develops the first drug for a disease with no other treatment or cure and acquires a pat... View the full answer