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sarasmith06 sarasmith06
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A year ago

The diagram below shows the demand curve and marginal cost and marginal revenue curves for a new heart medication for which the pharmaceutical firm holds a 20-year patent on its production and sales. This protection gives the firm monopoly power for the 20 years of the patent.

Short description: A graph plots output against price. Long description: The horizontal axis representing output lists the following values from left to right: Q subscript 0 and Q subscript 1. The vertical axis representing the price lists the following values from top to bottom: P subscript 0, P subscript 1, and P subscript 2. The graph shows two lines and a curve. A dashed decreasing line represents MR. A decreasing line represents D. A concave up increasing curve represents MC. MR and MC intersect at (Q subscript 0, P subscript 0). MC and D intersect at (Q subscript 1, P subscript 1). A point is marked on D at (Q subscript 0, P subscript 0). Vertical and horizontal dotted lines are extended from the points to meet the axes. The regions to the left of MR, above P subscript 0, above P subscript 1, above P subscript 2, and below P subscript 2 are marked D, C, B, and A. The regions to the right of MR, above P subscript 0, above P subscript 1, above P subscript 2, and to the left of Q subscript 0 are marked E, F, and G. The regions to the left of Q subscript 0, within P subscript 0 and P subscript 1, and below P subscript 1 are marked H and I. The region to the right of Q subscript 0, below MR is marked K. The region to the right of MR, below MC, and to the left of Q subscript 1 is marked J.
FIGURE 10-9

Refer to Figure 10-9. Assume this pharmaceutical firm charges a single price for its drug. At its profit-maximizing level of output, it will generate a deadweight loss to society represented by



▸ areas H + I + J + K.

▸ areas H + I.

▸ areas I + J + K.

▸ There is no deadweight loss generated.

▸ It is not possible to determine with the information provided.
Textbook 
Microeconomics

Microeconomics


Edition: 17th
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anitasaganitasag
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