Table 15-18
A monopolist faces the following demand curve: Suppose marginal cost is constant at $8 per unit.
-Refer to Table 15-18. Suppose the firm depicted in the table is selling a prescription drug for which it had a patent, but the patent has expired. As new firms enter the market and sell the generic version of this drug competitively, what quantity will be sold?
A)3 units
B)4 units
C)5 units
D)6 units

Question

Table 15-18
A monopolist faces the following demand curve:  Suppose marginal cost is constant at $8 per unit.
-Refer to Table 15-18. Suppose the firm depicted in the table is selling a prescription drug for which it had a patent, but the patent has expired. As new firms enter the market and sell the generic version of this drug competitively, what quantity will be sold?
A)3 units 
B)4 units 
C)5 units 
D)6 units

Quizplus · Accepted Answer

When the patent expires, the monopolist will face competition from new firms entering the market selling the generic version of the drug. As a result, the monopolist will no longer be able to charge a price above marginal cost. In the long run, the monopolist will earn zero economic profit and produce the quantity where marginal cost equals marginal revenue, which is 6 units in this case. Therefore, the quantity sold after the entry of new firms will be 6 units.

Table 15-18 A Monopolist Faces the Following Demand Curve: Suppose Marginal