The diagram below shows the demand curve and marginal cost and marginal revenue curves for a new heart medication for which the pharmaceutical firm holds a 20-year patent on its production and sales.This protection gives the firm monopoly power for the 20 years of the patent. FIGURE 10-6
-Refer to Figure 10-6.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 the demand curve and marginal cost and marginal revenue curves for a new heart medication for which the pharmaceutical firm holds a 20-year patent on its production and sales.This protection gives the firm monopoly power for the 20 years of the patent.  FIGURE 10-6
-Refer to Figure 10-6.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

Perfect price discrimination means that the firm charges each buyer exactly their willingness to pay, so there is no consumer surplus left. However, the firm produces up to the point where marginal cost equals marginal revenue, which also coincides with the point where the demand curve intersects with the marginal cost curve. Thus, the firm will produce the socially efficient quantity of output and there will be no deadweight loss generated. Therefore, the correct answer is D.

The Diagram Below Shows the Demand Curve and Marginal Cost