Question

Write your response in the text box. If graph is required, attach image or scan of your graph using the "v" like icon in the text response box, or use the embed image icon to attach your photo/scan of your graph. Answer each prompt in one paragraph/bullet format (where asked to "list")

QUESTION: Prescription drug prices in the United States are often substantially higher than in Canada, the United Kingdom and in India. Today, pharmacies in these countries fill millions of low-cost prescriptions through the mail to U.S. citizens. Given that the pharmaceutical industry cannot prevent the resale of these drugs,

A) are the industry’s effort to price-discriminate useless? Explain your answer

B) GRAPH the condition(s) of price-discrimination in this market structure. Remember to label curves and attach your graph to this response box or use the prompts below to attach your graph - submit graph

Answer 1

A) Not completly. These industries in countries other than the United States aim to increase their sales through price discrimination, i.e., they offer similar drug prescriptions at a lesser price, thus pushing any average US citizen to buy from their prescription. You must also note that these pharma industries don't go at loss by reducing their prices. They have made a good estimate of how much an US citizen will be willing to pay for the drug through extensive research, and they offer the prescribed drugs pertaining to that price thereby increasing the additional revenue (AR) or the producer surplus. Thus price discrimination takes place smoothly. It might go useless without proper research on analyzing how much the consumer is willing to pay.

B)

This is an example of first degree price discrimination. The graph below shows you the conditions for this kind of price discrimination assuming a pure competition exists between the competitors.

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