1. The market for pharmaceutical drugs takes on both monopolistic competition and monopoly market structures. When a firm discovers a new drug, patent laws give the firm a monopoly power. But eventually, the firm's patent expires, and any company can make or sell the drug. What should happen to the price of a drug when the patent expires?

1. If the government were to increase income taxes, how would that affect output (RGDP) and the price level in the short run? In the long run? Describe how the aggregate supply and aggregate demand curves would be affected? How should uncertainty about the size of fiscal multipliers affect the reliance on monetary and fiscal policy as tools for stabilizing the economy?