DrugCo Has Two Demand Equations for Its Retail Products (Pain

Question

DrugCo Has Two Demand Equations for Its Retail Products (Pain

Examlex · Accepted Answer

The Answer is Starting with the pain relief drug,P = 100 - 10 Q
So,MR = 100 - 20 Q
Setting MC = MR,we get 30 = 100 - 20 Q or
20 Q = 70
Or Q = 3.5 units and so,P = 100 - 10 (3.5)= $65
Now going to the cancer drug,P = 200 - 15 Q
So,MR = 200 - 30 Q
Setting MC = MR,we get 30 = 200 - 30 Q
Or 30 Q = 170 or Q = 5.67 units and so P = 200 - 15(5.67)= $115
So in the retail markets the drugs will be priced at $65 and $115respectively.
The wholesale drug will cost $115 to the wholesalers and the company will retail the cheaper drug to the consumers.Switching this order will allow other manufacturers to buy the cheaper drug which can be resold in the wholesale market for a much higher price but less than $65,and drive DrugCo out of business.

DrugCo Has Two Demand Equations for Its Retail Products (Pain

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