A firm sells a vaccine in the U.S. and Canada. The demand function in U.S. is Q = 120 2p, and that in Canada is Q = 60 p, where all prices are measured in U.S. dollars and quantity is measured in the same unit. The firm's marginal cost is MC = 10 in both countries.

(a) Initially, the U.S. and Canada governments prevent resale of the vaccine. What are the firms optimal and ? (The same price has to be charged to all consumers in the U.S. market and all consumers in Canada market.) How many units does it sell in the U.S. and Canada markets?

(b) Now assume that the U.S. and Canada governments permit resales and per unit transportation and other transaction costs are negligible, so that the pharmaceutical monopoly can no longer charge different prices in these two countries. What price will the firm charge and how many vials will it sell in the U.S. and Canadian markets?

(c) After the U.S. and Canada governments permitted the resale, the plant in Canada adopted a new production technology, which changes the marginal cost function to be = 5 + (1/50)Q . How will this change affect the results in part (b)? How many vials will be produced in Canada and the U.S.?