Marginal revenue and marginal cost curves for each market

Reference no: EM13695904

A pharmaceutical firm faces the following monthly demands in the U.S. and Mexican Markets for one of its patented drugs:

Qus= 300,000 - 5,000Pus and Qx= 240,000- 8,000Px

Where quantities represent the number of prescriptions. Assume that the resale or arbitrage among markets is impossible and that marginal cost is constant at $2 per prescription in both markets. Monthly fixed costs are $1million in the US and 500,000 in Mexico.

a) Draw the demand, marginal revenue and marginal cost curves for each market. Estimate the profit maximizing prices and quantities graphically and/or determining the solutions algebraically. What are the firm’s total profits?

b) Determine the quantity in each market and maximum possible total profits if the firm engages in perfect (first degree) price discrimination. Is this behavior possible?

Reference no: EM13695904

Questions Cloud

What is the present worth of his remaining income from trust : Ken will receive a $5,000 annual payment from a family trust. This will continue until Ken in 30; he is now 20. Inflation averages 4% and Ken’s real MARR is 8%. If the first payment is a year from now and a total of 10 payments are to be made, what i..

Random variables : Identify the distribution that is most probable for the following random variables:

Pool the risk the best with greater numbers of people : Would it be just be better off if all insurance was administered through the government since it could have everyone on it and pool the risk the best with greater numbers of people?

Build a new office building production facility : Tasty manufacturer is planning to build a new office building production facility. The facility can be built in at reduced capacity now for $40 million and can be expanded 15 years later for an additional $35 million. An alternative is to construct t..

Marginal revenue and marginal cost curves for each market : Where quantities represent the number of prescriptions. Assume that the resale or arbitrage among markets is impossible and that marginal cost is constant at $2 per prescription in both markets. Monthly fixed costs are $1million in the US and 500,000..

Find the equilibrium quantity and price under a monopsony : Suppose that the market for primary care physicians (PCPs) has monopsony power. The supply of PCPs is Ls= -500+2W, which can be rewritten as W=0.5Ls +250. The marginal cost of PCPs equals MC=Ls +250 and the (inverse) demand for PCPs is : W=(1000/3)-1..

Features of a desirable monetary policy instrument : Discuss the key criteria for success and the advantages of a central bank adopting the framework of inflation targeting. Consider the features of a desirable monetary policy instrument. Is the size of the Federal Reserve staff good policy instrument?..

Marketing strategies and organizational designs : Traditionally, many public utility companies (such as telephone & electric service providers) have been highly regulated. Thus, they have operated in stable environments, shielded from competition.

Debts and deficits : Debts and Deficits: Compare the traditional view versus the view of Ricardian equivalence of the effects of a debt-financed tax cut on:

User Account

All Pages