Question

3. Monsanto developed a new herbicide and has a patent on it. This herbicide becomes very popular among farmers and is largely used in the whole country. After some years the patent expires and lower-cost generic brands with exactly the same effectiveness of Monsanto's herbicide become available in the market. Explain and show graphically what happens to quantity supplied by an individual producer as he/she has access to cheaper herbicide (make sure to use both marginal and average cost curves). In other words, at any given price level, explain and show graphically whether the producer will be producing more or less.

Answer 1