Fountain Plus, Inc. a manufacturer of bottled water, has enjoyed rapid growth in

Question

Fountain Plus, Inc. a manufacturer of bottled water, has enjoyed rapid growth in sales of one of its flavored water products, Xtrafresh, for which it has a patent, which has just expired. It now faces fierce competition from a number of other bottled water manufacturers in the case of Xtrafresh.

As a manufacturer in the bottled water industry, what type of a market does Fountain Plus Inc. operate in before and after the patent expired? Explain why.

What will happen to Fountain Plus Inc. now that the patent has expired?

Fully answer each question in a maximum of 1/2 page or 250 words.

Explanation / Answer

Ans.

Fountain Plus Inc. had a monopolistic market where there is one firm and large in size. it was only a single seller for bottled water .It had patent right in Xtrafresh which is one of its flavoured water products. So it legally excluded other firrms from using that process for number of years. It did not face competition such that there was growh in sales of the product. It had behaved as price setter having full control over the market. This one firm provided market supply of its product i.e of bottled water.It had enhanced its profit margin contributing to its revenue and increased market share as well as gave recognition to the company. Such that it encouraged innovation among them. Thus more profitable price for monopoly occurs when outut level ensures that marginal cost equals marginal revenue.Now patent has expired so Fountain Plus operates in perfectly competitive market where there are many different buyers and sellers of the bottled water.It creates market for close substitutes ,yet product is still popular.

However with expiration of patent rights after anyone can then use that process or innovative idea to produce that product.Firm no more enjoys monopoly market which it had before as it faces competition from other manufacturers of bottled water.Such that firm has to lower its prices facing price competiton.Although firm can continue to use its creation by there innovative ideas through further research and dvelopment but won't enjoy same market share as it was before.Buyers will be now paying less than before. So demand curve shifts leftwards for Fountain Plus Inc.Now after expiry of patent the knowledge becomes public domain that anyone can use and access.To maintain there name of business they would have to come up with more innovative ideas.

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