TAILIEUCHUNG - Ebook Microeconomics - Theory and applications with calculus (4/E): Part 2
(BQ) Part 2 book “Microeconomics - Theory and applications with calculus” has contents: Monopoly and monopsony, pricing and advertising, game theory, oligopoly and monopolistic competition, factor markets, property rights, externalities, rivalry, and exclusion, asymmetric information, contracts and moral hazards. | Monopoly and Monopsony 11 Monopoly: one parrot. A firm that creates a new drug may receive a patent that gives it the right to be the sole producer of the drug for up to 20 years. As a result, the firm can charge a price much greater than its marginal cost of production. For example, one of the world’s best-selling drugs, the heart medication Plavix, sold for about $7 per pill though it costs about 3¢ per pill to produce. A new drug to treat hepatitis C, Harvoni, sells for $1,350 a pill or $113,400 for a 12-week course of treatment. Every year, many pharmaceuticals lose their patent protection. In 2015, drugs with $44 billion of sales lost patent protection, including Abilify (which treats neurological disorders), Avodart (prostatic hypertrophy), and Celebrex (pain and inflammation). In 2016, the patents for Crestor (cholesterol), Glumetz (diabetes), Nuvigil (attention disorder/weight loss), and others expire. In 2017, patent protection for Tamiflu (viral infections), Acthar Gel (endocrine disorders), and others end. Generally, when a patent for a highly profitable drug expires, firms enter the market and sell generic (equivalent) versions of the brand-name drug. Generics’ share of all . prescriptions rose from about 18% in 1984 to nearly 80% currently. The . Congress, when it originally passed a law permitting generic drugs to quickly enter a market after a patent expires, expected that patent expiration would subsequently lead to sharp declines in drug If consumers view the generic product and the brand-name product as perfect substitutes, both goods will sell for the same price, and entry by many firms will drive the price down to the competitive level. Even if consumers view the goods as imperfect substitutes, one might expect the price of the brand-name drug to fall. However, the prices of many brand-name drugs have increased after their patents expired and generics entered the market. The generic drugs are relatively .
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