37. Whistler, a pharmaceutical company, has recently been the only company to deliver a ground-breaking vaccine in Europe to market, and hence became a monopolist. It wants to sell also in the African market, and it therefore considers price-discrimination between the two markets. Whistler knows that the demand for Africa is QA = 120 - 1.5P and the demand for European market is QE = 100 - 0.5P. If Whistler would price discriminate, it would set European price to PE = 50 and PA = 25. If it would not discriminate, it would set a world price PW = 35. Arbitrage can be prevented with health and safety regulation. If Whistler price discriminated: o Consumers in Europe would benefit relative to the uniform world price Consumer welfare would be largest o Whistler would obtain a lower profit relative to the uniform world price Consumers in Africa would suffer relative to the uniform world price

37. Whistler, a pharmaceutical company, has recently been the only company to deliver a ground-breaking vaccine in Europe to market, and hence became a monopolist. It wants to sell also in the African market, and it therefore considers price-discrimination between the two markets. Whistler knows that the demand for Africa is QA = 120 - 1.5P and the demand for European market is QE = 100 - 0.5P. If Whistler would price discriminate, it would set European price to PE = 50 and PA = 25. If it would not discriminate, it would set a world price PW = 35. Arbitrage can be prevented with health and safety regulation. If Whistler price discriminated: o Consumers in Europe would benefit relative to the uniform world price Consumer welfare would be largest o Whistler would obtain a lower profit relative to the uniform world price Consumers in Africa would suffer relative to the uniform world price

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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