Suppose That It Would Cost a Firm $10 Million to Develop

question 52

Multiple Choice

Suppose that it would cost a firm $10 million to develop a new drug. In the absence of a patent, other firms will be able to copy and bring to market a generic equivalent of the drug in three years. In each of these three years, the firm would earn monopoly profits of $3 million. A patent will generate monopoly status for the firm for twenty years. If the government knew this information ahead of time, which of the following is most CORRECT?

• A) The government should not grant a patent to the firm, because the firm would earn monopoly profits for three years even without the patent.
• B) The government should not grant a patent to the firm, because monopoly leads to efficiency losses relative to the competitive market.
• C) The government should grant a patent to the firm, because even with a patent the firm will not earn a monopoly profits.
• D) The government should grant a patent to the firm, because the firm would not produce the drug at all without a patent.

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Definitions:

Licensed Practical Nurse (LPN)

A nurse who has obtained the necessary credentials and licensure to provide basic medical care under the supervision of registered nurses and doctors.

Malpractice

Failure by a healthcare professional to provide the standard of care, which results in harm or injury to the patient.

Physical Abuse

The use of physical force or violence to cause harm or injury to another individual.

Child Protective Services

A governmental agency tasked with responding to reports of child abuse or neglect, providing services and interventions to ensure the safety and well-being of children.