After the Patent Runs Out on a Brand Name Drug

question 71

Multiple Choice

After the patent runs out on a brand name drug, generic drugs enter the market. What happens next in the market?

• A)Price increases, and total surplus decreases.
• B)Price decreases, and total surplus decreases.
• C)Price decreases, and total surplus increases.
• D)Price increases, and total surplus increases.

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Definitions:

Interest-Bearing Notes

Written promises to pay a specified sum of money, plus interest, on a certain date to the holder of the note.

Large Denominations

Refers to currency or securities of a high face value.

Operating Leases

Operating leases are contractual agreements in which the lessee pays to use an asset for a specific period without gaining ownership, typically used for equipment and vehicles.

Capitalize

The accounting practice of recording a cost/expense as an asset, rather than an expenditure, thereby extending the recognition of its financial impact over the useful life of the asset.