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    Determining the optimal price levels

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    Say there is a market for a certain drug consists of domestic (United States) consumers and foreign consumers. The drug's marginal cost is constant at $5 per dose. The demand schedules for both regions are as follows:
    US Foreign
    Price Quantity Quantity
    $60 1,000 200
    55 1,500 250
    50 2,500 400
    45 4,000 600
    40 8,000 1,000
    35 14,000 2,000
    30 20,000 3,500
    25 30,000 7,000
    20 40,000 16,000
    15 55,000 35,000
    10 65,000 75,000
    5 77,000 150,000

    - If the markets cannot be separated, what is the marginal revenue for the quantities that you can determine? What price should be charged to maximize profit?
    - If the markets can be separated, determine the marginal revenues in each market. If the drug company must set a single price for the drug in each market, what price should be charged in the foreign market? In the domestic market?

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    Solution Summary

    Solution depict the steps to determine the optimal price levels in the given cases.

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