Final answer:
A firm with a patented HIV prevention drug would have increased market power, but may not charge an extremely high price due to factors like public perception, elasticity of demand, and potential government intervention against monopolistic pricing.
Step-by-step explanation:
If a firm found, patented, and received FDA approval to market a drug that prevents HIV infections, its market power would significantly increase.
This is because the firm would essentially have a monopoly on the preventative HIV medication due to its patent, allowing it to set the market price.
However, the firm might choose not to charge an extremely high price due to several considerations such as the potential for negative public perception, the possibility of government intervention, and the concept of price elasticity of demand, where setting a lower price could lead to higher overall revenue by making the drug affordable to a larger portion of the population.
Furthermore, charging a lower price could preempt the entry of competitors once the patent expires and generic versions become available, which are significantly cheaper than name-brand drugs. Additionally, if the firm sets the price too high, it might invite regulatory scrutiny, similar to antitrust cases against cartels, as seen in the late 1990s with vitamin manufacturers such as Hoffman-La Roche.