Profit-maximizing prices and quantities graphically

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Reference no: EM13985664

A pharmaceutical firm faces the following monthly demands in the U.S. and Mexican markets for one of its patented drugs: QUS = 300,000 - 4,000*PUS and QX = 240,000 - 7,000*PX where quantities represent the number of prescriptions. Assume that resale or arbitrage among markets is impossible and that marginal cost is constant at $2 per prescription in both markets. Monthly fixed costs are $1 million in the United States and $500,000 in Mexico. Draw the demand, marginal revenue, and marginal cost curves for each market. Estimate the profit-maximizing prices and quantities graphically and determine the solutions algebraically. What are the firm’s total profits?

Reference no: EM13985664

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