Walgreens Pharmacies today announced that its board of directors has declared a quarterly dividend of $47.75 cents per share, down $1.25 from the previous quarter. The news comes in spite of double-digit inflation for suppliers. The producer price index, a measure of costs for industries, rose 0.9 percent from the previous month and has risen 11.1 percent over the past 12 months. The small number of major pharmacies such as Walgreens purchase drugs from pharmaceutical distributors. The negotiated percentage is often influenced by a pharmacy’s volume of purchases and pharmaceutical distributors' $450 billion in annual revenues is highly concentrated among three traditional full-line distributors: AmerisourceBergen, Cardinal Health, and McKesson.

2A. Construct a market to analyze Walgreens Pharmacies at the beginning of 2022 assuming both supply and demand have some elasticity. Label initial curves with subscript “1” and identify profit-maximizing price and quantity as p1 and q1.

2B. Consistent with information in the article, show changes to the market for Walgreen Pharmacies between January 2022 and May 2022. Label new curves with subscript 2 and identify new price and quantity as p2 and q2.

2C. Define the type of market situation that exists for pharmaceutical distributors.

2D. Assume the three major pharmaceutical distributors (AmerisourceBergen, Cardinal Health, and McKesson) secretly form a cartel.

(i) Construct the new market for pharmacy distribution.

(ii) State the effect from the change in the market for pharmacy distribution in the market for Walgreen Pharmacies. Label new curves with subscript “ ‘ “ and identify new price and quantity as p’ and q.