Assume that a Swiss drug company holds the patent on a malaria medicine that has no close substitutes. If it charges the same price in every country where it sells this medicine, a price that will maximize its profits, that price will exceed what the vast majority of consumers in twenty lower-income countries can afford to pay. a) Illustrate this situation using supply and demand curves. b) Use supply and demand curves to show how the Swiss company can sell at different prices in each country and make a profit in each. Identify on the curves the profit the Swiss company makes in a typical poorer country, and the profit it makes in a wealthier country. c) What condition is necessary for the Swiss company to be able to follow this strategy?
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Question 3.
Assume that a Swiss drug company holds the patent on a malaria medicine that has no close
substitutes. If it charges the same price in every country where it sells this medicine, a price that
will maximize its profits, that price will exceed what the vast majority of consumers in twenty
lower-income countries can afford to pay.
a) Illustrate this situation using
b) Use supply and demand curves to show how the Swiss company can sell at different prices in
each country and make a profit in each. Identify on the curves the profit the Swiss company
makes in a typical poorer country, and the profit it makes in a wealthier country.
c) What condition is necessary for the Swiss company to be able to follow this strategy?
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