1. Consider a pharmaceutical company that holds a patent for the production and sale of a specific drug, and is therefore a monopolist in this market.
a) Assume that the government enacts a policy that increases the fixed cost that the firm must pay to continue to maintain the patent. Will this have an impact on consumer prices? Show analytically by also making use of graphical analysis to describe profit maximization.
b) How would your answer to point (a) change if instead of altering the fixed cost, the government chose to increase the variable cost by requiring a tax per quantity of drugs produced?
