In this question, consider the market for a pharmaceutical drug ("A") that is only produced by one manufacturer.

1. Suppose that the market demand for drug A is perfectly elastic (but supply is not). Draw a graph that illustrates the market for drug A, labeling the axes, a supply curve (S), the demand curve (D), and the equilibrium price (P*) and quantity (Q*). [2 points]
2. How much consumer surplus is obtained by consumers in this market? With this in mind, why might a regulatory authority not be concerned about the potential for harm to consumers caused by this manufacturer's position as the sole producer? [2 points]
3. There is only one other drug ("B"), which is made by a different manufacturer, that can be used instead of drug A to treat a common disease. Suppose that the sale of drug B is now pulled from the market by the FDA due to concerns about contamination at its manufacturer's plant. How will this change the demand curve for drug A? Why? [2 points]
4. Assume that it is important that the disease referenced in part b) is treated promptly. Knowing this, do you think that the ban of drug B would make demand for drug "A" more or less elastic? Why? [2 points] 5) Given your answers to parts a) through d), do you think that the ban of drug B would change the level of concern that a regulatory authority might have about there being only one manufacturer of drug A? Why?