XYZ Labs—the sole producer of Diamatine (a prescription drug) — charges a price for the drug that is
significantly above the firm’s marginal cost. It takes XYZ Labs 10 years of research and development before products like Diamatine are finally sold in the market.
Do you think government regulators would be wise to impose price ceilings on Diamatine in order to bring the price in line with marginal costs?
I say no as the investment of costs over the 10 years would be significant