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Monopolist profit-maximizing price-quantiy and profits

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Reference no: EM131325826

It is very expensive to do the research to invent a new drug, but the cost of producing the drug once it has been invented is only $1 per dose.

Assume the inventor has a patent, which creates a monopoly.

a) Draw a diagram showing the monopolist's profit-maximizing price, quantiy, and profits

b) Explain whether the monopolist's equilibrium results in a the socially optimal price and quantity.

c) Would it be a good policy to impose a price ceiling? If so at what level? Explain.

d) Would it be a good policy to eliminate patents, so any firm can produce the drug? Explain

Reference no: EM131325826

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