A pharmaceutical firm faces the following monthly demands in the US and Mexican markets for one of its patented drugs: (you are not required to solve the problem)

Q_US= 300,000 - 5,000P_US and Q_X= 240,000 - 8,000P_X

where quantities represent the number of prescriptions. Assume that resale or arbitrage among markets is impossible and that marginal cost is constant at $2 per prescription in both markets. Monthly fixed costs are $1 million in the United States and $500,000 in Mexico.

In the question above, are you able to estimate the profit-maximizing prices and quantities algebraically. How would you approach the problem?

If you are able to calculate the profit maximizing prices and quantities, are you calculate the firm's total profits (total revenue-total costs)?

If a firm finds that its price elasticity is numerically less than one, what advice would you have?