When a pharmaceutical company buys exclusive marketing rights to sell a drug in East Asian markets, which economic concept does this most directly illustrate?

• A. Market power through barriers to entry
• B. Perfect competition
• C. Public goods provision
• D. Price elasticity of demand

Answer: (A)

Verified step by step guidance

1. Identify the key elements of the scenario: a pharmaceutical company obtains exclusive marketing rights, which means it has special control over selling the drug in a specific market (East Asian markets).
2. Recall the concept of 'market power,' which refers to a firm's ability to influence the price or quantity of a good in the market, often due to limited competition.
3. Understand 'barriers to entry' as obstacles that prevent other firms from entering the market and competing, such as exclusive rights, patents, or high startup costs.
4. Analyze how exclusive marketing rights create a barrier to entry by legally preventing other firms from selling the same drug in that market, thus granting the company market power.
5. Compare this with other options: perfect competition assumes many sellers with no market power; public goods provision relates to goods that are non-excludable and non-rivalrous; price elasticity of demand measures responsiveness of quantity demanded to price changes, which is unrelated to exclusive rights.