The diagram below shows a pharmaceutical firm's demand curve and marginal cost and marginal revenue curves for a new heart medication for which the firm holds a 20- year patent on its production.
FIGURE 10- 5
-Refer to Figure 10- 5.Assume this pharmaceutical firm is practicing perfect price discrimination among its buyers.At its profit- maximizing level of output,it will generate a deadweight loss to society represented by

Question

The diagram below shows a pharmaceutical firm's demand curve and marginal cost and marginal revenue curves for a new heart medication for which the firm holds a 20- year patent on its production.
  FIGURE 10- 5
-Refer to Figure 10- 5.Assume this pharmaceutical firm is practicing perfect price discrimination among its buyers.At its profit- maximizing level of output,it will generate a deadweight loss to society represented by

Quizplus · Accepted Answer

When the firm is practicing perfect price discrimination, it is able to charge each consumer their maximum willingness to pay, which results in no deadweight loss to society. This is because all potential consumers are able to purchase the medication at a price they are willing to pay, and the firm is able to capture all of the consumer surplus. Therefore, there is no inefficiency or deadweight loss generated.

The Diagram Below Shows a Pharmaceutical Firm's Demand Curve and Marginal