Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Download EconOfDrugsHandout
Document related concepts
Transcript
Competition, Monopoly, and Market Failure in the Market for Drugs P* c Demand Marginal Revenue a b MC=$1 Quantity This figure shows the equilibrium price for a medication over which the manufacturer has monopoly power. The profitmaximizing price P* is the price where marginal revenue equals marginal cost. Pareto efficiency requires that the price be equal to the marginal cost. Since price is much higher, there is an economic inefficiency: consumers between points a and b would be willing to pay more than $1 for the drug, but because the maximum they are willing to pay is < P* they will not obtain the medication.
