Profit There Are Two Important Essay

Open, View, and/or
Download this Document

Total Length: 1235 words ( 4 double-spaced pages)

Total Sources: 4

Page 1 of 4

Generic drug makers therefore are competing in the market according to the skills in which they specialize. They specialize in efficient production and distribution of drugs, rather than in developing new drugs.

A generic drug maker can go out of business simply on the basis of not executing their business plan well. However, generic producers have built their business plans around the FDA's current set of regulations. A change in those regulations could have an adverse effect on generic drug makers. For example, if the monopoly protections that come from a new drug approval are extended out further, that would reduce the ability of the generic producer to make money on any given drug. This is especially the case of the drug in question becomes obsolete during the time period prior to the generic having access to that market. In such a situation, the generic maker would not have access to that product during its useful economic life. Such extensions of monopoly protections would have to be across board, since most generic producers make hundreds or even thousands of individual drugs.

4. In conditions of perfect competition, it is conceivable that a firm can earn a profit in the short run. In the short run, a change in the market could result in one or more firms earning a profit. However, these profits will signal to other firms to enter the market. When these other firms enter the market, the profit will no longer exist. This is why it is said that there are no long-run profits in a state of perfect competition.

Stuck Writing Your "Profit There Are Two Important" Essay?

View All Our Example Profit There Are Two Important Essay

Have A Custom Example Essay Written



Margins costs in a state of perfect competition are at a point of marginal prices in the long run. If there is a change in the costs, a firm might be able to temporarily exploit this for a profit, but with perfect information consumers will not stand for this. If there is collusion among sellers, the marginal price might not be the same as the marginal cost, but over the long run this will simply reduce demand and the new equilibrium point will have it that is still no difference between price and cost in a state of perfect competition.

A firm may continue to operate in the short run even without profits because either a) the firm believes that conditions in the market will change and profits will occur at a future point, or b) because the costs associated with exiting the business are higher than the costs associated with the lack of profits. Zero profit is better than a loss, so the exit costs of the business are important. It is important to note that in true perfect competition, there are no exit costs. If the price exceeds average variable costs, the firm might continue to operate, however, on the assumption that even if the firm shuts down it must pay fixed costs. If there are no exit barriers, however, that means there are no costs associated with breaking leases, disposing of assets, etc.…so there cannot be ongoing fixed costs if a firm shuts down.

Works.....

Show More ⇣

     Open the full completed essay and source list


OR

     Order a one-of-a-kind custom essay on this topic


sample essay writing service

Cite This Resource:

Latest APA Format (6th edition)

Copy Reference
"Profit There Are Two Important" (2012, May 18) Retrieved May 20, 2025, from
https://www.aceyourpaper.com/essays/profit-two-important-57852

Latest MLA Format (8th edition)

Copy Reference
"Profit There Are Two Important" 18 May 2012. Web.20 May. 2025. <
https://www.aceyourpaper.com/essays/profit-two-important-57852>

Latest Chicago Format (16th edition)

Copy Reference
"Profit There Are Two Important", 18 May 2012, Accessed.20 May. 2025,
https://www.aceyourpaper.com/essays/profit-two-important-57852
   

Open, View, and/or
Download this Document
order custom essay example