Question
Can you show a breakdown of how you solve this problem? Vacx-IT is a company that has developed a Covid vaccine.Vacx-IT serves the US and
Can you show a breakdown of how you solve this problem?
Vacx-IT is a company that has developed a Covid vaccine.Vacx-IT serves the US and Canada. The two markets are separate due to regulation. The demand functions for each are
Qus = 400-0.5Pus
Qca = 600-Pca
where Q is in thousands of vaccine shots per year, and P is the price per shot. The total cost of production is given by
TC = 80,000 + 200Q
where Q - Qca + Qus
A. What are the profit maximizing prices and quantities in each market?
B. What is the elasticity of demand at the optimal price/quantity points in the two markets? In which market is demand more elastic (again, at the optimal price/quantity points)?
C. Explain findings under A. (prices in each market) and B. (point elasticities in each market) in terms of elasticities and price discrimination
D. To be better prepared for future pandemics, the US and Canada decide to dismantle the regulation that separated the markets. Doctors and pharmacies in both countries can now purchase vaccines at the best available price. What price should Vacx-IT charge? [Assume that shipping costs for the vaccine are negligible.]
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