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In the United States, the 1984 Drug Price Competition and Patent Term Restoration Act gives pharmaceutical companies exclusive protections for innovating a new drug or vaccine. Specifically, if a company devises a new drug or vaccine, it is awarded a patent which grants it an exclusive right to produce the drug or vaccine for a limited amount of time. The resulting monopoly profits that the company enjoys acts to offset the high risk and high costs of developing new drugs and vaccines. BlaxoSmithKline (BSK) is a pharmaceutical company that is considering whether or not to develop a vaccine for a novel virus that is currently spreading across the world. BSK estimates that that once it develops the vaccine, the costs of manufacturing and distributing a given quantity of Q units will be given by TC(Q) = 8100 + 35Q + Q2 As done in class, you may assume that the 8100 in the total cost function is a fixed cost that can be saved by not producing. The market demand curve for a vaccine is given by QD(P) = 5000 419 2.1) Suppose that BSK has developed the vaccine and has been awarded a patent. What is the market outcome? Please make sure to compute and state the equilibrium price, quantity, economic surplus and deadweight loss that arise from trade. Also, provide a visual depiction of your result using an appropriate diagram. (10 Points) 2.2) Suppose that there are many other pharmaceutical firms that could also produce the vaccine and that have the exact same total cost curve as BSK. Thus, when the patent expires, the market will quickly transition from one with a monopoly producer to a perfectly competitive environment. Given this new market structure, what will be the minimum price at which a firm will begin producing the vaccine? Use this price to identify (1) the long-run equilibrium quantity traded, (2) the total number of firms that will enter into the market in equilibrium, (3) the total consumer surplus, and (4) the producer surplus of each firm once the patent expires. Provide a diagram that shows the problem faced by each firm in the long-run and the aggregate supply and demand that will prevail in the market in the long run. (5 Points)