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APL is a manufacturer of pharmaceutical products. The firm's research efforts have resulted in the development of a new, non-addictive pain reliever that is considerably
APL is a manufacturer of pharmaceutical products. The firm's research efforts have resulted in the development of a new, non-addictive pain reliever that is considerably more effective than other products on the market. Another pharmaceutical firm, PACER , independently developed a very similar product that is as effective. To avoid a lengthy court battle over conflicting patent claims, the two firms have decided to cross license each other's patents and proceed with production. It is unlikely that any other pharmaceutical companies will be able to duplicate the product, making the market for this pain reliever a duopoly for the foreseeable future. Market demand for the pain reliever is estimated to be: Q = 2, 600 - P Prices and quantities are in cases per month. Total costs for each firm for production of the pain reliever are as follows (i.e., each firm has the same cost function, where q = quantity produced by either APL or PACER): TC APL =TC PACER =500,000 200q Q1. If each firm acts independently to maximize its profits what will be the equilibrium quantities selected by APL? By PACER ? 1 What is total output for the market? What is the market price? What are
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