Acton Institute Powerblog

How monopolies use market power to increase prices

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Note: This is post #47 in a weekly video series on basic microeconomics.

AIDS has killed more than 36 million people worldwide, notes economist Alex Tabarrok. There are drugs available to treat AIDS, but the price in the U.S. of one pill is 25 times higher than its cost. Why is this life-saving drug so expensive?

In this video by Marginal Revolution University, Tabarrok shows how patent rights have created a monopoly in the U.S. market for AIDS medication, causing pills to be very expensive. In other countries, however, such as India, which does not recognize patents on AIDS medication, prices remain low. Using this example, Tabarook shows how monopolies use market power to increase prices.

(If you find the pace of the videos too slow, I’d recommend watching them at 1.5 to 2 times the speed. You can adjust the speed at which the video plays by clicking on “Settings” (the gear symbol) and changing “Speed” from normal to 1.25, 1.5 or 2.)

Previous in series: http://blog.acton.org/archives/97659-the-balance-of-industries-and-creative-destruction.html

Joe Carter Joe Carter is a Senior Editor at the Acton Institute. Joe also serves as an editor at the The Gospel Coalition, a communications specialist for the Ethics and Religious Liberty Commission of the Southern Baptist Convention, and as an adjunct professor of journalism at Patrick Henry College. He is the editor of the NIV Lifehacks Bible and co-author of How to Argue like Jesus: Learning Persuasion from History's Greatest Communicator (Crossway).

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