Economics Help

7. A pharmaceutical company with exclusive patent control over the new miracle flu drug can sell its output in two different countries, with demands as follows (not drawn to scale):

P P

10

1

500 Q 1000 Q

a. Which country do you think has higher per capita income? Why do you think so?

b. Calculate the elasticity of demand at Q = 200 for each country.

c. If the monpolist’s TC = 0.50Q + 360, what quantities will it sell and what prices will it charge in each market? Draw a graph (or add to the ones give above) to illustrate your answer.