Bellringer Slates1. What sort of demand do lifesaving

pharmaceuticals have?2. Assume a firm has a patent on the

cure for cancer, what would the graph look like according to our theory of

the firm? Label DWL also.3. Do you think this firm should be allowed to charge any price it wants?

Explain4. How would quantity supplied change

if that firm price discriminated?

Stossel clip

• Graph on board

CASE STUDY: Monopoly vs. Generic Drugs

Patents on new drugs give a temporary monopoly to the seller.

When the patent expires, the market becomes competitive, generics appear.

MC

Quantity

Price

D

MR

PM

QM

PC =

QC

The market for a typical drug

Other similar markets?• Move from monopoly to

perfect competition• http://copyright.cornell.edu/

resources/publicdomain.cfm• http://www.gutenberg.org/• Books, music, etc