Patents on Semaglutide Due to Expire Next Year

That's Right! - A legal monopoly is a market in which competition and entry are restricted by the granting of a public franchise, government license, patent, or copyright. As Novo Nordisk holds the patent on semaglutide, giving it the exclusive right to produce the good, the market for semaglutide is a legal monopoly.

Well Done! - As an exclusive holder of the patent, Novo Nordisk sets output where MR=MC, which results in a price above marginal cost. The profit-maximizing quantity is less than the efficient quantity, and underproduction of semaglutide results in a deadweight loss. Some consumers who need the drug don’t get it.

Correct! - When the patent expires, more firms can enter and produce generic semaglutide. The supply will increase and price will fall. Each of the extra unit, which was a part of deadweight loss under monopoly, is now available at lower price. Consumer surplus increases and the deadweight loss eliminates.