Suppose a drug patent runs out, the market consequences of this are?
(i) the price will increase
(ii) the price will converge on the marginal cost
(iii) the quantity sold will increase
A)(i) and (ii)
B)(ii) and (iii)
C)(i) and (iii)
D)(i), (ii) and (iii)

Question

Quizplus · Accepted Answer

When a drug patent runs out, competitors can enter the market and produce generic versions of the drug, increasing competition and causing the price to converge on the marginal cost. This can lead to lower prices for consumers and an increase in quantity sold. Therefore, (ii) and (iii) are correct, while (i) is not.

Suppose a Drug Patent Runs Out, the Market Consequences of This