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Question - MedicLab has a drug patent on an effective migraine headache medicine. MedicLab is currently earning an economic profit.
(a) Draw a correctly labeled graph for MedicLab. In your graph, identify the following.
a. MedicLab's profit-maximizing price and quantity, labeled and.
b. MedicLab's area of economic profit (area should be shaded in).
(b) The government is considering now anti-trust legislation and may regulate MedicLab's migraine medicine even though its patent is still valid. Show, on a graph, what price the government may require Mediclab to sell its migraine medication for if it wants MedicLab to produce at the following.
a. The socially optimal level of output, labeled as or.
b. The fair-retum price, labeled as.
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