How do monopolies affect the prince of goods ?

1 answer:

8 0

We can say that in a monopoly, the price is always higher than the socially optimal price
EXAMPLE: a pharmaceutical company brings out a new medicine for diabetes. It acquires a patent from the government for the production of that medicine implying that only that pharma company has the right to produce the medicine till the patent expires. This leads to a monopoly situation in the market. Now this pharma company can charge the highest price possible so that its profit is maximum since it is the sole producer of that medicine.

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