Question

In: Economics

A prescription drug is produced in the United States and sold internationally. Each unit of the...

A prescription drug is produced in the United States and sold internationally.
Each unit of the drug costs $60 to produce. In the German market, you sell the drug for
150 euros per unit. The current exchange rate is 0.667 U.S. dollars per euro. Current
demand for the drug is 100 units, and the estimated elasticity is 2.5. Assuming a linear
demand curve, determine the appropriate sales price (in euros) for the drug. SOLVE USING EXCEL SOLVER. NOTE: aLL PARTS OF THE QUESTION ARE ALREADY INCLUDE HERE. NO EXTRA DATA SHEET.

Solutions

Expert Solution

The optimal solution is shown below, according to which price should be raised to $205 or 205/0.667 = 307.5 euros which will maximize profit.

Rahul Sunny answered 1 year ago
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