Questions Suppose foreign pharmaceutical distributors from Zargadee are currently prohibited from selling drugs in the U.S. Assume that foreign drugs are identical to drugs produced domestically. Suppose that the U.S. does not import drugs produced in Zargadee from any other country. a. Use supply and demand analysis to show how the exclusion of imported drugs from Zargadee affects the equilibrium price and quantity of drugs in the U.S. market. b. How much does the quantity of drug imports decrease as a result of the regulation? Explain using your graph. c. According to the article, are consumers in favor of drug importation from Zargadee? Explain using your graph. d. According to the article, are U.S. drug producers in favor of drug importation from Zargadee? Explain using your graph. e. If Congress wanted to maximize total surplus, should it allow importation or not? Explain using your graph. f. If drugs from Zargadee were not identical to other drugs, briefly describe how that difference would be a problem for your analysis.
Questions Suppose foreign pharmaceutical distributors from Zargadee are currently prohibited from selling drugs in the U.S. Assume that foreign drugs are identical to drugs produced domestically. Suppose that the U.S. does not import drugs produced in Zargadee from any other country. a. Use supply and demand analysis to show how the exclusion of imported drugs from Zargadee affects the equilibrium price and quantity of drugs in the U.S. market. b. How much does the quantity of drug imports decrease as a result of the regulation? Explain using your graph. c. According to the article, are consumers in favor of drug importation from Zargadee? Explain using your graph. d. According to the article, are U.S. drug producers in favor of drug importation from Zargadee? Explain using your graph. e. If Congress wanted to maximize total surplus, should it allow importation or not? Explain using your graph. f. If drugs from Zargadee were not identical to other drugs, briefly describe how that difference would be a problem for your analysis.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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For simplicity, we assume there are just two countries. The US and Zargadee. The US is the importing nation.
We use the following graph to build up the explanation:
In the above figure,
DD is the domestic demand curve
DS is the domestic supply curve
In a free trade scenario, P* is the free trade price and the excess demand over domestic supply at the free trade price would have been the import quantity of drugs by the US shown by the green line.
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