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In many countries such as the US, when a pharmaceutical company discovers a new drug, it can apply to the government for a patent on
In many countries such as the US, when a pharmaceutical company discovers a new drug, it can apply to the government for a patent on the new drug. The patent gives the company the exclusive right to sell the new drug for a long period of time, such as 20 years. In other words, the pharmaceutical company is a monopolist in the market for the new drug. Suppose the market demand for the new drug is shown as below:
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