Question

Pfizer-BioNTech is the founder and single producer of Covid-19 vaccines sold in the world. There was a worldwide argument on the patented drugs of the pharmaceutical industry especially in the wake of the current pandemic.

a) Draw a graph to illustrates the effect of patented Covid-19 vaccines produced by Pfizer-BioNTech. In your graph, show the:

i. profit area of the market.

ii. consumer surplus.

iii. producer surplus.

iv. deadweight loss.

b) Why Pfizer-BioNTech will be allocatively inefficient?

c) Briefly discuss the differences between monopoly and monopolistic firm's profit in the long run.

d) Define barriers to entry. Discuss one type of barriers to entry with examples.

Answer 1

a.

b.

P Pfizer will the allocatively inefficient. Because they produce less quantity of output and sell it at a higher price as compared to the perfectly competitive market .and the effort can be say that they are allocatively inefficient here there is an efficient allocation of resources.

 

c.

Under the Monopoly market the firm is able to earth abnormal or the axis profit in the long run but the monopolistically competitive firm is able to earn only the normal profit in the long run. If he earned excess profit some firms enter the market and hence the cost of production will increase as a result he can only the normal profit. If the firm on excess loss some firm will exit the market as a result he will also able to earn the normal profit .

 

d.

Under the Monopoly market there is entry and exit barrier.at the same time and the monopolistically competitive market is there is free entry and exit of the firm.