Answered! Monopolies exist under certain conditions as we have learned this week. Drug companies are often considered in a…

A monopoly dealing in drug business will ensure a monopoly price is in existence at the time it establishes its quantity of product for sell. The sole business has the authority of supplying the entire market with its product due to the patent right t holds (Mankiw, 2016). This aspect enables the company to establish an industry price without any influence coming from the other rivalry firms. Such a company will use the demand of its drug product to set a special price for its products in the market. More so, the monopoly state is likely to push such a form to go for a production supply, as well as price combination that will reap maximum economic profit for the business. Any shortening if the patent length will tempt the firm to come up with extremely high prices for its products due to the fear that the monopoly favor will soon get lost. On the other hand, an increment in length of the patent rights will enable the firm to set realistic process for its items as it will have no pressure of any near competition for the market of its products. Consequently, relatively high pricing of a product in the monopolistic market is likely to result in market failure, as customers will fill exploited by the existing firm (Mankiw, 2016).

References

Mankiw, N. G. (2016). Principles of microeconomics. Fort Worth [u.a.: The Dryden Press.