The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7

-When Glaxo-Wellcome introduced AZT, an AIDS drug, it was able to enjoy high profits because:
A)the drug was highly recommended by doctors.
B)of the quick response of rivals in introducing substitute drugs.
C)of barriers to entry provided by patents.
D)of its competitive price in the pharmaceutical industry.
E)it experienced constant returns to scale in the long run.

Question

The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7
 
-When Glaxo-Wellcome introduced AZT, an AIDS drug, it was able to enjoy high profits because:
A)the drug was highly recommended by doctors. 
B)of the quick response of rivals in introducing substitute drugs. 
C)of barriers to entry provided by patents. 
D)of its competitive price in the pharmaceutical industry. 
E)it experienced constant returns to scale in the long run.

Quizplus · Accepted Answer

The high profits enjoyed by Glaxo-Wellcome was due to the barriers to entry provided by patents. This means that the company had exclusive rights over the production and sale of the drug, allowing them to charge a higher price and earn higher profits. This advantage was only temporary, as the patent would eventually expire and competitors would be able to enter the market, leading to increased competition and lower profits.

The Figure Given Below Shows the Aggregate Demand and Supply