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1 (50 points total). Consider Milagria, a (fictitious) drug designed to prevent some minor disease. ABCD, the manufacturer of this drug, can produce Milagria at
1 (50 points total). Consider Milagria, a (fictitious) drug designed to prevent some minor disease. ABCD, the manufacturer of this drug, can produce Milagria at a constant marginal cost of $0.20 per 30-milligram tablet (i.e., MC = 0.20), irrespective of where the drug is sold. ABCD incurs $220,000 total annual fixed costs associated with producing the drug. The demand for the drug varies across countries according to a number of factors, including patient income, the availability of substitutes, and insurance coverage. In the U.S., the (inverse) demand for Milagria is PUS = 4 - 0.002QUS, where PUS is the price per 30-milligram tablet, and quantity is measured in hundreds of tablets. The (inverse) demand in Mexico is given by PMEX = 2 - 0.001QMEX. [Note: the numbers in this problem are not meant to be realistic; as with other homework and practice problems, the main goal is to illustrate course concepts]
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