economics

posted by .

Mirks labs is a British pharmaceutical company that currently enjoys a patent
monopoly in Europe, Canada and the United States, on Zatab (pronounced zay-tab), an allergy medication. The global demand for Zatab is Qd = 15.0-0.2P
Where Qd is annual quantity demanded (in millions of units) of Zatab, and P is the wholesale price of Zatab per unit. A decade ago, Mirk labs incurred $60 million in research and development costs for Zatab. Current production costs for Zatab are constant and equal to $5 per unit.

a. What wholesale price will Murk labs set? How much Zatab will it produce and sell annually? How much annual profit does the firm make on Zatab?
b. The patent on Zatab expires next month expires next month, and dozens of pharmaceutical firms are prepared to enter the market with identical generic versions of Zatab. What price and quantity will result once the patent expires and competition emerges in this market? How much consumer surplus annually will allergy sufferers who take Zatab gain?
c. Calculate the annual deadweight loss to society due to the drug firms market power in Zatab. What exactly does this deadweight loss represent?
d. Given your answer to part c, would it be helpful to society for competition authorities in Europe, Canada, and the United States to limit entry of generic drugs to just five years for new drugs? Why or Why not?

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. Economics

    Demand function for Zatab: Qd = 15.0 - 0.2P Q = annual quantity demanded P = wholesale price of one Zatab unit Production cost per unit: $5 Mirk Lab incurred a $60 million R&D cost a decade ago 1: What wholesale price will Mirk Labs …
  2. Economics

    Mirk Labs is a British pharmaceutical company that currently enjoys a patent monopoly in Europe, Canada, and the United States on Zatab (pronounced zay-tab), an allergy medication. The global demand for Zatab is: Qd=15.0-0.2P Where …
  3. Managerial Econ

    Mirk Labs is a British pharmaceutical company that currently enjoys a patent monopoly in Europe, Canada, and the United States on Zatab (pronounced zay-tab), an allergy medication. The global demand for Zatab is: Qd=15.0-0.2P Where …
  4. Economics Today the micro view 13th edition

    A British pharmaceutical company spent several years and considerable funds on the development of a treatment for HIV patients. Now, with the protection afforded by patent rights, the company has the potential to reap enormous gains. …
  5. Managerial Economics

    Mirk Labs is a British pharmaceutical company that currently enjoys a patent monopoly in Europe, Canada, and the U.S on Zatab, an allergy medication. The global demand for Zatob is Qd=15.0-0.2P where Qd is annual quantity demanded …
  6. economics

    Why might it be appropriate for the government to allow a pharmaceutical company to have a monopoly in the production of a drug?
  7. Economics

    Given the larger population runs in The States than in Canada, the costs are spread over more units. In fact in The States a cost over run of 10% could be dumped in Canada. Given the law of demand, what would happen to the Canadian …
  8. Managerial Economics

    Mirk Labs is a pharmaceutical company that currently enjoys a patent monopoly in Europe, Canada, and the U.S. on Zatab, an allergy medication. The global demand for Zatab is Qd= 15.0- 0.2 P where Qd is annual quantity demanded (in …
  9. Managerial Economics

    Mirk Labs is a pharmaceutical company that currently enjoys a patent monopoly in Europe, Canada, and the U.S. on Zatab, an allergy medication. The global demand for Zatab is Qd= 15.0- 0.2 P where Qd is annual quantity demanded (in …
  10. Managerial Economics

    Mirk Labs is a pharmaceutical company that currently enjoys a patent monopoly in Europe, Canada, and the U.S. on Zatab, an allergy medication. The global demand for Zatab is Qd= 15.0- 0.2 P where Qd is annual quantity demanded (in …

More Similar Questions