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Suppose that Acme Pharmaceutical Company discovers a drug that cures the common cold. Acme has plants in both the United States and Europe and can

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Suppose that Acme Pharmaceutical Company discovers a drug that cures the common cold. Acme has plants in both the United States and Europe and can manufacture the drug on either continent at a marginal cost of 10. Assume there are no xed costs. In Europe, the demand for the drug is Q5 = 70 - PE, where Q5 is the quantity demanded when the price in Europe is P5. In the United States, the demand for the drug is Q; = 110 - Pu, where Q; is the quantity demanded when the price in the United States is PU. a. If the rm can engage in third-degree price discrimination, what price should it set on each continent to maximize its profit? What prots will it earn? b. Assume now that it is illegal for the rm to price discriminate, so that it can charge only a single price P on both continents. What price will it charge, and what prots will it earn? c. Calculate and compare the total, consumer, and producer surplus in the world under 3rd degree price discrimination and uniform-price monopoly. d. Suppose the demand for the drug in Europe declines to Qg = 30 - Pg. If the firm cannot price discriminate, will it be in the firm's interest to sell on both continents? e. Consider any demand curves for the drug in Europe and in the United States. Will a firm that practices third-degree price discrimination ever make a lower profit than a uniform price monopolist

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