Research has shown that most economic profits from selling a prescription drug are eliminated 20 years after the drug is first offered for sale.The main reason for the elimination of profits is
A)after 20 years most people who have taken the drug have passed away or are cured of the illness the drug was intended to treat.
B)firms sell their patent rights to other firms so that they can concentrate on finding drugs to treat new illnesses.
C)the quantity demanded of the drug has increased enough that the demand becomes inelastic and revenue falls.
D)after 20 years patent protection is ended and other firms can produce less-expensive generic versions of the drug.

Question

Quizplus · Accepted Answer

The elimination of profits 20 years after the drug is first offered for sale is primarily due to the end of patent protection, which allows other firms to produce less-expensive generic versions of the drug. This increases competition and reduces the price of the drug, leading to lower profits for the original firm. Factors such as the passing away or curing of patients who took the drug or the sale of patent rights to other firms may also play a role but are not the main reason for the elimination of profits. The increase in demand leading to inelastic demand and falling revenue is also unlikely as firms can adjust the price of the drug to maximize revenue.

Research Has Shown That Most Economic Profits from Selling a Prescription