Acme Pharmaceutical Company discovers a vaccine that prevents the common cold and has a patent that grants it a monopoly on this drug. Acme has plants in both the North America and Europe and can manufacture the drug on either continent at a marginal cost of 10. Assume there are no fixed costs. In Europe, the demand for the drug 1s (g = 70 P, where (Jg 1s the quantity demanded when the price in Europe is Pg. In North America the demand for the drug is Q= 110 Py, where () is the quantity demanded when the price in North America is Py (a) (d) (e) Determine the aggregate demand function for the combined mar- ket. Determine the inverse demand function for the combined market and the inverse demand functions for each of the two mar- kets separately. To begin, assume that it is illegal for the firm to price discriminate, so that it can charge only a single price P on both continents. What price will it charge, and what profits will it earn? Now say the firm can engage in third-degree price discrimination. What quantity and price should it set on each continent to maxi- mize its profit? What profits will it earn? Calculate total surplus, which is consumer plus producer sur- plus/profits, under each scenario h) and ). Will total surplus he higher with price discrimination or without price discrimination?\" Will the firm sell the drug on both continents in both scenarios? Consider the problem with the following change. Suppose the demand for the drug in Europe declines to Qg = 30 Fe. If the firm cannot price discriminate, now will it be in the firm's interest to sell on both continents? (f) Sav now that the patent on the vaccine expires and generic manu- facturers can enter the market and produce the drug at the same marginal cost. Assume that there are many generic drug compa- nies, and that competition is very high. What will be the equilib- rinm price of the drug in this case? Compute total consumer and producer surplus/profits in both markets in this case and compare it to d). Comment on the differences