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As the Result of a Patent, Only One Company Produces

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As the result of a patent, only one company produces the drug Zoloft. This company was accused of abusing its market power: using its position as the sole producer of the drug to act as a monopolist and charge very high prices. A Competition Bureau economist estimates that the price elasticity of demand for Zoloft at its current price is - 0.5. Does this evidence support or contradict the contention that the firm is a profit- maximizing monopoly? Why or why not?


Definitions:

Identification

The process of recognizing or establishing the identity of a person or thing.

Owner in Common

A form of property ownership in which two or more individuals share ownership rights in a property without specific divisions among them.

Fungible Goods

Goods that are alike by physical nature, by agreement, or by trade usage. Examples are wheat, oil, and wine that are identical in type and quality.

Title

Legal ownership of property, including the rights to use, sell, or transfer the property.

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