Question: A pharmaceutical company faces the following demand function for one of its products in the American market:

Q A = 300,000 – 5,000P A

where Q A is the number of prescriptions sold in the American market annually and P A is the price per prescription. The firm's annual total cost function is:

C A = $1,000,000 + $2 Q A

The company is considering also entering the Brazilian market where the demand for the pharmaceutical is:

Q B = 240,000 – 8,000P B

where Q B is the number of prescriptions sold in the Brazilian market annually and P B is the price per prescription. The cost function for the Brazilian market is:

C B = $1,000,000 + $2Q B

1. Calculate the firm's optimal price in the US. Show your work. (20 points)
2. What is the optimal price to charge in the Brazilian market? Show your work. (20 points)
3. Now suppose that the interest rate in the U.S. is increasing relative to other countries, what do you expect to happen to the exchange rate of the US dollar? What effect would this have on the demand in the Brazilian market and revenues from the Brazilian market? (Note: Production will occur in the U.S.) (20 points)

Price: $2.99

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