![]() The price will come down to P E and the quantity produced will be increased to C Q. Assuming that there are no other barriers to entry after the expiry of the patent, the market will become a perfectly competitive one. Now, the market becomes more competitive and the company loses its monopoly power as the newly entered firms start to sell the drugs at a cheaper price than the monopolist firm. Now, what happens when the patent life expires?Īfter the patent life expires, other pharmaceutical companies come into the market to sell the drugs. Therefore, the pharmaceutical company can sell an M Q amount of its medicines at the price of P P during the active patent life. Let's look at Figure 1, where a pharmaceutical company sells its drugs at the point where MR = MC, assuming that the marginal cost of making the drugs is constant and that the price is maximized following the market demand. The monopoly is allowed and heavily regulated by government municipalities and rates and rate increases are controlled. This allows the company to have a monopoly in the market. Let's say a pharmaceutical company has recently discovered new drugs and has filed patents on them. 1 - A government monopoly created by patents Now that we are familiar with patents and how it works, let's look at an example of government monopolies that are created by patents.įig. As a result, Wayne now holds a monopoly on the sale of his book. putting themselves above the law with their influence on the gov. He may now go to the government and copyright his work, which ensures that other people won't just copy his work and sell it unless they have his permission. Examples of real-life monopolies include Luxottica, Microsoft, AB InBev, Google, Patents, AT&T, Facebook, and railways. Answer (1 of 11): Corporations donating very large sums of money to political campaigns and lobbying efforts to get the government to pass laws that would be in their favor to let them monopolize the consumers and the whole nation. Monopolies are a common feature of capitalist economies, but governments must ensure that these companies do not exploit their position to impose high rates for goods and services. Let's say that Wayne is a writer who has written a book. Examples of real-life monopolies include Luxottica, Microsoft, AB InBev, Google, Patents, AT&T, Facebook, and railways. Price Determination in a Competitive Market For example, the unique location of a dry cleaner may confer slight market power because some customers are willing to pay a little more rather than walk an.Market Equilibrium Consumer and Producer Surplus.Determinants of Price Elasticity of Demand.Cross Price Elasticity of Demand Formula.Effects of Taxes and Subsidies on Market Structures. ![]() Monopolistic Competition in the Short Run.Monopolistic Competition in the Long Run. ![]()
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