Question

2.1) Suppose that BSK has developed the vaccine and has been awarded a patent. What is the market outcome? Please make sure to compute and state the equilibrium price, quantity, economic surplus and deadweight loss that arise from trade. Also, provide a visual depiction of your result using an appropriate diagram. ONLY NEED THE DIAGRAM

Answer 1

As BSK obtains a patent, he will indulge in monopoly trade.He will fix a quantity where MR = MC. And equate it with the demand curve to fix the price.

P is the equilibrium price, and Q is the equilibrium quantity.

Economic benefit = the area of A+B+C+D. A+B is the consumer surplus. C+D is the producer surplus.

DWL is represented in the area E. It results from inefficient trade of producing MR=MC, and not price = MC.