1. A pharmaceutical firm has a current patent on its sleep aid drug used by USMC. The table below describes the firm's revenues and costs. Price Quantity Demanded Total Revenue Total Cost Marginal Revenue Marginal Cost P Q TR TC MR MC 9 10 $90 18 8 20 $160 38 7 2 7 30 $210 70 5 3.2 6 40 $240 105 3 3.5 5 50 $250 145 1 4 4 60 $240 190 -1 4.5 3 70 $210 240 -3 5 2 80 $160 295 -5 5.5 1 90 $90 360 -7 6.5 0 100 SO 450 -9 9 How can you tell? a. (1p) What type of firm is this pharmaceutical firm? b. (1p) What quantity does this profit-maximizing firm choose to produce, and at what price per unit? Justify your choices for Q and P. Q= P= c. (2p) Show graphically (using generic curves) the choice of Q, and P for the pharmaceutical firm. Identify on graph above the loss in efficiency (DWL) from a monopoly, when compared with a competitive market outcome (Qc, Pc). Label graph. e. (1p) If patents generate a monopoly, and therefore a smaller efficiency in the use of limited resources (Le DWL), why does the government offer patent and trademarks protection/monopoly? 1 I