# What prices would the pharmaceutical company set?

Suppose the market for a certain pharmaceutical drug consists of dome Show more Scenario 1 (length: as needed)?Suppose the market for a certain pharmaceutical drug consists of domestic (United States) consumers and foreign consumers. The drugs marginal cost is constant at \$5 per dose. The demand schedules for both regions are given below. US Foreign Price Quantity Quantity \$60 1000 200 55 1500 250 50 2500 400 45 4000 600 40 8000 1000 35 14000 2000 30 20000 3500 25 30000 7000 20 40000 16000 15 55000 35000 10 65000 75000 5 77000 150000 1. Assuming the markets cannot be separated (and thus the same price must be charged to both regions) what is the marginal revenue for the quantities that you can determine? What price should be charged to maximize profit? 2. If the markets can be separated determine the marginal revenues in each market. If the firm must set a single price for the drug in each market (the prices can vary between markets) what price should be charged in the foreign market? In the domestic market? What happens to the companys profit? Scenario 2 (length: as needed)?Assume that the drug company can negotiate with the US and foreign government(s) and thus tries to implement the two-tier pricing scheme that was described in lecture 3 with one price for access to the drug and a second price set per unit of the drug set at the marginal cost of the drug. You may assume that the increase in demand happens at exactly the listed prices. That is 200 consumers in the foreign market would be willing to pay exactly \$60 an additional 25 would be willing to pay \$55 150 more would be willing to pay \$50 and so on. 1. What prices would the pharmaceutical company set? 2. What is the companys profit? 3. Does resale between markets need to be prevented? Show less

## “Get 15% discount on your first 3 orders with us” Use the following coupon FIRST15

Posted in Uncategorized