Question 5 Market Segmentation A pharmaceutical company develops a new medicine. The new medicine is patented and the company is the sole monopolist in its market. The company can sell the medicine in North America and/or in Africa. In North America, the demand for the medicine is equal to QNAD = 80-2PNA while in Africa it is Q^D=60-2PA. The marginal cost of the new treatment is MC = 20 regardless of where it is sold. Quantity is in millions of doses and price is in dollars per dose. Suppose that the company cannot prevent resales and must charge the same uniform price P in the two continents. 1. 2. What is the highest price the company can charge if it wishes to sell the medicine in both continents? And if it wishes to sell the medicine in North America only? Sum the North American demand to the African demand to find the global demand for the treatment. Keep in mind that if the price of the medicine is too high, the company will sell in North America only. 3. What is the company's marginal revenue? 4. What is the company's profit maximizing quantity? 5. What is the company's profit maximizing price? 6. How many doses does the company sell in North America? And in Africa? 7. What is the consumer surplus of North American consumers? What is the consumer surplus of African consumers? Suppose the company successfully lobbies the US and Canadian governments to introduce quality restrictions on medicines sold in North America so that now it can segment the North American and the African markets. 8. How many doses of medicine would the company sell in North America? At what price? 9. How many doses of medicine would the company sell in Africa? At what price? 10. Under this new regime, what is the consumer surplus of North American consumers? And of African consumers? 11. Under what regime does the company create more total surplus (CSNA + CSA + PS)?