Happy s Pets inc has had a virtual monopoly anti depressants drugs for animals f

Question

Happy s Pets inc has had a virtual monopoly anti depressants drugs for animals for many years (similar to Eli lilly product prozac for human) with a patent on this drug it has had very little competition and this drug has been a major source of company revenue and profit. However the patent will soon expire and other drug manufacturing firms seem to be preparing to enter the market in competition with Happy Pets. Describe the current market structure and they type of market structure you think will emerge after the patent expires. What should happy pets do in response to these markets changes to maximize its profits from this product?

Explanation / Answer

In this case, Happy pets is currently a monopoly and they enjoy economic profits. When their patent expires, other firms will enter the market. When a firm earns economic profits, this send a signal to the market and other firms enter the market forming a structure called perfect competition. In this case, the price will fall and the quantity supplied will increase. New firms will learn what is in Happy pets products by reverse engineering or taking something apart from finish to start. In this case, they will test the drug, find out what is in it and come up with something exactly the same but called something else. Hope this helps

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