Read the article, "CVS Plays Hardball with Rival Drug Chains" by Ed Silverman and Paul Ziobro,The Wall Street Journal, October 20, 2014. Based on this article, consider the market for prescriptions drugs and answer the following questions,using the attached graph.

Suppose health insurance policies did not cover prescription drugs in their plans.

1. What would be the price of a prescription? Why? -P

1. How many prescriptions would be bought? Why?-

1. How many prescriptions would be sold? Why?

Now suppose prescription drugs are covered in health plans offered by health insurance companies such as CVS Health Corp.

1. What would be an appropriate price to choose as the initial copayment? Why?

1. How many prescriptions would consumers want to buy at that price? Why?

1. How many prescriptions would the drugstore want to sell at that price? Why?

1. How many prescriptions would be sold? Why?

1. How much would the consumer pay? How much would the drugstore receive? Why?

1. What would be the per-unit-cost of the prescription drug to the health insurance company?

Now suppose CVS Health Corp. charges a higher copayment for those consumers that purchase prescription drugs from a drugstore store that sells tobacco products.

1. What would be an appropriate price to choose as the new copayment? Why?

1. How many prescriptions would consumers want to buy at that price? Why?

1. How many prescriptions would the drugstore want to sell at that price? Why?

1. How many prescriptions would be sold? Why?

1. How much would the consumer pay? How much would the drugstore receive? Why?

1. What would be the per-unit-cost of the prescription drug to the health insurance company?

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