What is the new equilibrium price and quantity

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Reference no: EM131380655

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 QX = 240,000-8,000PX where quantities represent the number of prescriptions. Assume that resale or arbitrage among markets is impossible and marginal cost is constant at $2 per prescription in both markets. Monthly fixed costs are $1 million in the U.S. and $500,000 in Mexico.

P(us)1=31.00 Q(us1)=145,000 P(mexiso)1=16.00 Q(Mexico)1=112,000

Suppose that in the U.S. insurers cover 50% of the cost of the drug. What is the new equilibrium price and quantity? What are the firm's total profits?

Reference no: EM131380655

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