How could use price regulation of the pharmaceutical company

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Reference no: EM13241832

In developing a vaccine for the SARS virus a pharmaceutical company incurs a very high fixed cost. The marginal cost of delivering the vaccine to patients, however, is negligible (consider it to be equal to zero). The pharmaceutical company holds the exclusive patent to the vaccine.

Suppose you have accurate information about the pharmaceutical company's fixed cost. How could you use price regulation of the pharmaceutical company, combined with a subsidy to the company to have the efficient quantity of the vaccine provided at the lowest cost to the government?

Reference no: EM13241832

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