A pharmaceutical company with a patented drug faces demand curves of Qus =250,000-5,000Pus and QCA =150,000-4,000PCA. Suppose international drug sales are illegal and the marginal cost is 2. What will the company charge Canadian consumers and how much will be demanded? Would a law to make international sales legal help US consumers? What about Canadian consumers? Would the firm holding the patient oppose th law? (no calculations are needed in the last three questions)

A pharmaceutical company with a patented drug faces demand curves of Qus =250,000-5,000Pus and QCA =150,000-4,000PCA. Suppose international drug sales are illegal and the marginal cost is 2. What will the company charge Canadian consumers and how much will be demanded? Would a law to make international sales legal help US consumers? What about Canadian consumers? Would the firm holding the patient oppose th law? (no calculations are needed in the last three questions)

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter10: Strategy: The Quest To Keep Profit From Eroding

Section: Chapter Questions

Problem 10.6IP

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A monopolist sells a good to two demographically separate markets. The demand for its good in the first market is given by Q1 = 24 – P1, (2) while the demand in the second market is given by Q2 — 20 — Р2. (3) The monopolist has constant average and marginal costs of $2 per unit. Answer the following: (a) Find the price the monopolist would charge if it sells its good for the same price in both markets. How many units does the monopolist sell in each market? What are its profits? (b) If the monopolist can maintain separation between the two markets, what price would it charge in each market? How many units does it sell in each market? What are its profits?
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