1 / 2

Competition, Monopoly, and Market Failure in the Market for Drugs

Competition, Monopoly, and Market Failure in the Market for Drugs. P*. c. Demand. MC=$1. a. b. Marginal Revenue. Quantity.

Download Presentation

Competition, Monopoly, and Market Failure in the Market for Drugs

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Competition, Monopoly, and Market Failure in the Market for Drugs P* c Demand MC=$1 a b Marginal Revenue Quantity This figure shows the equilibrium price for a medication over which the manufacturer has monopoly power. The profit-maximizing 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.

More Related