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The pharmaceutical industry operates in an aggressively competitive market. There are a limited number of firms in the industry. This is due primarily to the high fixed cost of entering the market, the high cost of research and development, obtaining patents and dealing with mergers and acquisitions. Let us assume that over 70% of the products sold in this market are protected by patents for the next eight years.
1.) Identify and describe the market characteristics of perfect competition.
2.) Explain price competition in perfect competition.
3.) Explain the barriers to entry in perfect competition.
4.) Does this pharmaceutical industry conform to an economist's definition of a perfectly competitive market?
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