After the patent runs out on a brand name drug,generic drugs,which have the same effect as the branded drug,enter the market.Because of this
A)the price increases and total surplus decreases.
B)the price decreases and total surplus decreases.
C)the price decreases and total surplus increases.
D)the price increases and total surplus increases.

Question

Quizplus · Accepted Answer

When generic drugs enter the market, the competition between the branded drug and the generic drug drives down the price of the branded drug. As a result, the price decreases and total surplus increases as more consumers are able to afford the drug and the demand increases. This benefits consumers who now have access to affordable drugs and producers of the generic drug who can make profits from selling the drug. However, it may result in decreased profits for the original brand name drug manufacturer.

After the Patent Runs Out on a Brand Name Drug,generic