Good afternoon, Can you believe CopyCatPharma? Theyve once again entered a market after our patent has expired. This time its for Chilax, our 1st generation anti-anxiety medication (not to be confused with the new version of Chilax that our R&D team is contemplating pursuing). As I think you already know, profits from Chilax were over $184M last year. But when our patent expired in December there was nothing we could do to stop competitors from entering and selling a chemically identical drug. I dont even understand CopyCatPharma. They are selling a generic version of Chilax, but 2 years ago we lost our patent on our elbow inflammation reduction pill and they didnt bother to copy that. Why? (Speaking of which, profits have been a steady $300,000 per year for that drug for the last decade or so; not great, but well take it). Whatever, Im just venting. Ill see you at the annual holiday bowling contest tomorrow.

Explain how the profits firms earn (or dont earn) and the price of each good and service communicates valuable information to market participants. Regarding profits, you may find it useful to consider Adam Smiths assertion that It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. Regarding prices, you may consider how a centralized planner in the old Soviet Union decided which levels of output should be produced for each good. See also F.A. Hayeks The use of knowledge in society.