What is the shortest patent length required

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Reference no: EM131132921

Patent for NoSmak. A potential new drug, NoSmak, could cure lip-smacking with one dose, but research and development would cost $80 million. The monopoly profit (earned while a single firm produces the product) will be $10 million per year. After a patent expires, the original developer of the drug will have sufficient brand loyalty to earn $3 million per year for another 10 years.

a. What is the shortest patent length required to induce a firm to develop the drug?

b. How would your answer to part (a) change if you ignore the profit earned after the patent expires?

Reference no: EM131132921

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