Suppose that the government decided to reduce pharmaceutical patent protection by requiring companies to sell their drugs at marginal cost. What are the likely consequences of such a policy?

Question

Quizplus · Accepted Answer

Reducing pharmaceutical patent protection and requiring companies to sell drugs at marginal cost would increase consumer surplus and reduce deadweight loss by making drugs more affordable. However, it would also likely decrease the future supply of new drugs as companies would have less incentive to invest in costly research and development without the promise of recouping those costs through higher prices.

Suppose That the Government Decided to Reduce Pharmaceutical Patent Protection