tent for No Smak. A potential new drug, NoSmak, cures lip smacking with one dose, but research and development ould cost $70 million. The monopoly profit (earned while a single firm produces the product) will be $10 million per yea ter a patent expires, the original developer of the drug will have sufficient brand loyalty to earn $1 million per year for other 10 years. What is the shortest patent length required to induce a firm to develop the drug?

tent for No Smak. A potential new drug, NoSmak, cures lip smacking with one dose, but research and development ould cost $70 million. The monopoly profit (earned while a single firm produces the product) will be $10 million per yea ter a patent expires, the original developer of the drug will have sufficient brand loyalty to earn $1 million per year for other 10 years. What is the shortest patent length required to induce a firm to develop the drug?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter11: Price And Output Determination: Monopoly And Dominant Firms

Section: Chapter Questions

Problem 1.1CE

See similar textbooks

Similar questions

Patent for NoSmak. A potential new drug. NoSmak, cures lip-smacking with one dose, but research and development would cost $50 million. The monopoly profit (earned while a single firm produces the product) will be $5 million per year. After a patent expires, the original developer of the drug will have sufficient brand loyalty to earn $2 million per year for another 10 years. a. What is the shortest patent length required to induce a firm to develop the drug? years. (Enter your response as an integer)
Exhibit 12.4 The Market Demand Curve for Claritin Price $8 With patent protection from the government, the demand curve that Schering-Plough faces for its sales of Claritin is the entire market. For example, if Schering-Plough chose a price of $4, then it would be able to sell 400 million units, but the demand curve shows that if it chose a price of $6 or higher, it wouldn't sell any Claritin, despite having a monopoly. 7 4 3 2 DClaritin 1 Let's assume/lestimate: What would the market 100 200 300 400 500 600 700 800 price and the quantity be under perfect competition? Demand: p=7-x/150 Quantity (in millions of pills) Cost = 1*x %3D And what for the Marginal Cost c'=1 monopoly?
Genentech owns a patent on tissue plasminogen activator (TPA), which is an enzyme that helps the body break down blood clots. TPA is particularly valuable to cardiac patients, since it often allows heart problems to be treated with medication rather than surgery. Recently, however, firms in the medical industry have come under fire by some members of Congress and the press for charging high prices and earning monopoly profits. a. If the government stripped Genentech and other pharmaceutical firms of their patents, do you think cardiac patients would benefit? Why?
Please explain and show graphically effect of patents in overall market structure.
What had Alcoa done that made the judge find it guilty of being a monopoly? a. Alcoa had used predatory pricing to keep new firms out of its marketb. Alcoa had engaged in price fixingc. Alcoa had never tried to monopolize the aluminum market, but its policy of building capacity to meet future demand had the effect of giving it a large market share that made it a de facto monopolyd. Alcoa had used tying contracts to drive rivals out of the markete. Alcoa had used price discrimination to acquire a monopoly Following its near bankruptcy in 1922, General Motors pioneered the decentralized management structure in which the firm was reorganized into semi-independent profit centers. Vice-presidents were appointed to manage these profit centers and were told that their bonuses would depend on the profitability of their division. This reorganization was designed to a. reduce management costsb. better capture economies of scalec. create a ratchet effect that would drive managers to perform…
Consider a mature maket with a demand given by P=105.4-10Q The cost of production is given by C=10Q For many years this market has been served by a monopolist. How much profit would the firm lose if it is forced to behave as a competitive firm In all your calculations use numbers with 4 decimal places.
Identify and discuss three ways in which a perfectly competitive market structure differsfrom a Monopoly.
Explain any two sources of restricted entry under monopoly!
The cost function for producing ethanol from municipal waste (wastehol) is 1000+10q2where q is in millions/gallons per year. The demand for wastehol is currently perfectly inelastic at 5 million gallons per year. Assume that producers of wastehol are perfectly competitive. California is deciding whether to convert all wastehol producers into a regulated wastehol utility. If wastehol is a regulated monopoly utility with the cost function above, what price would regulators set as the price of wastehol? Now assume that the wasteahol market has boomed and demand has grown to 20 (again million gallons per year). Now what is the regulated price of wastehol? You are the wastehol producer and are trying to decide whther to lobby for deregulating the wastehol industry. If wastehol were deregulated, if demand remains 20, what would the perfectly competitive price be? If you are a wastehol customer, you would prefer a deregulated industry if demand were 20? True/False?
We have learned the definition of monopoly as a market with one seller. Let's take some time to understand what that means, and how it can come about. What are some of the reasons that a market could be a monopoly? What is giving the monopolist their exclusive position in the market? Everyone should discuss a few reasons and/or examples of how a monopoly can come into existence. Typically the model of Monopoly predicts that all customers are charged the same price and that the monopolist selects the quantity and price combination from the market demand curve that maximizes profit. However, there are times where a monopolist may at least attempt to charge different prices for the exact same product depending on each consumer's willingness and ability to pay. In this case the monopolist might offer the product at a lower price to those who would otherwise not buy it, thus increasing quantity consumed in the market and reducing some of what is called the dead weight loss of monopoly.…
Whether true/False Monopoly can be created naturally.
Define monopoly relative to pharmaceutical market power.