Question

If there is a single uniform price for a life-saving drug in all the countries of the world, will everyone be better off (highest total welfare)?

Answer 1

Solution

In my view,if there is a single uniform price for a life-saving drug in all the countries across the globe,it will not ensure the highest total welfare because of the following reasons:

--> The currencies across the countries is not the same.For Example,say the cost of a life-saving drug is set at a uniform price of $1000. Now consider the case of two countries (say) India and the United States.Even if we assume that the govt.'s in both the countries do not provide subsidy,In the United States,the drug is very much affordable to it's citizens but in India the amount comes out be roughly around ₹70,000 (approx. exchange rate : 1 USD = 70 INR) which is nearly unaffordable to a huge class of the population

--> The cost of living ,value of life is different across different countries around the globe.

-->The affordability of countries' govt.'s is different for different countries. i.e., The Govt.of United States may provide the drug for free for all it's citizens but the same may not be the case for Govt. of India owing to very high price differential (owing to uniform pricing) and also due to it's very huge population.

Hope this solution helps !!