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:

Market Structure

The competitive environment characterizing a market, determined by the number of firms, product differentiation, and ease of entry and exit.

Agricultural Products

Goods derived from agriculture including crops, livestock, and products directly obtained from farming activities.

Wheat

Wheat is a cereal grain grown worldwide and is a staple food ingredient used for making bread, pasta, cake, and many other food products.

Pure Competition

A market format where there are many sellers presenting the same products, and none of these sellers are able to affect the market price on their own.