Scenario 2 (length: as needed)? Assume that the drug company can negotiate with

Question

Scenario 2 (length: as needed)?Assume that the drug company can negotiate with the US and foreign government(s) and thus tries to implement the two-tier pricing scheme that was described in lecture 3, with one price for access to the drug, and a second price set per unit of the drug set at the marginal cost of the drug.  You may assume that the increase in demand happens at exactly the listed prices.  That is, 200 consumers in the foreign market would be willing to pay exactly $60, an additional 25 would be willing to pay $55, 150 more would be willing to pay $50, and so on.<?xml:namespace prefix = o /?>

What prices would the pharmaceutical company set?

What is the company

Explanation / Answer

Imperfect competition: Any departure from perfect competition. However, imperfect competition usually refers to one of the market structures other than perfect competition. It refers to an economic agent (firm or consumer), group of agents (industry), model, or analysis that is characterized by imperfect competition. It contrasts with perfectly competitive.
Implicit price deflator: A broad measure of prices derived from separate estimates of real and nominal expenditures for GDP or a subcategory of GDP. Without qualification the term refers to the GDP deflator and is thus an index of prices for everything that a country produces, unlike the CPI, which is restricted to consumption and includes prices of imports.
Implicit tariff:
1. Tariff revenue on a good or group of goods, divided by the corresponding value of imports. Often lower than the official or statutory tariff, due both to PTAs and due to failures in customs collection.
2. The difference between the price just inside a border and the price just outside it, especially in the case of a good protected by an import quota.
Implicit tax: Lower (higher) before-tax required returns on assets that are subject to lower (higher) tax rates.
Implied volatility: The volatility that is implied by an option value given the other determinants of option value. The volatility that, when substituted in the Black-Scholes option pricing formula, yields the market price of the option.
Import authorization: The requirement that imports be authorized by a special agency before entering a country, similar to import licensing.
Import bias:
1. Any bias in favor of importing.
2. Applied to growth, it tends to mean a bias against importing, and against trading more generally. Thus growth that is based disproportionately on accumulation of the factor used intensively in the import-competing industry and/or technological progress favoring that industry.
Import demand elasticity: The elasticity of demand for imports with respect to price.
Import license: A document required and issued by some national government authorizing the importation of goods into their individual countries. The license to import under an import quota or under exchange controls. Licenses required by some countries to bring in a foreign-made good. In many cases, import licenses are also used by the issuing country to control the quantity of imported items.
Import parity price: A price charged for a domestically produced good that is set equal to the domestic price of an equivalent imported good -- thus the world price plus transport cost plus tariff.
Import penetration: A measure of the importance of imports in the domestic economy, either by sector or overall, usually defined as the value of imports divided by the value of apparent consumption.
Import price index: Price index of the goods that a country imports.
Import promotion: Any policy that encourages imports. A policy of export promotion generally has the side effect of stimulating imports as well. Today the term is more commonly used for policies used by developed countries intended to assist developing countries in exporting to them.
Import propensity: The marginal propensity to import (or sometimes the average propensity, if they are different).
Import relief: Usually refers to some form of restraint of imports in a particular sector in order to assist domestic producers, and with the connotation that these producers have been suffering from the competition with imports. If done formally under existing statutes, it is administered protection, but it may also be done informally using a VER.
Import substitute: A good produced on the domestic market that competes with imports, either as a perfect substitute or as a differentiated product.
Import substituting industrialization: A strategy for economic development based on replacing imports with domestic production.
Import substitution (ISI) : A strategy for economic development that replaces imports with domestic production. It may be motivated by the infant industry argument, or simply by the desire to mimic the industrial structure of advanced countries.
Import surcharge: A tax levied uniformly on most or all imports, in addition to already-existing tariffs.
Import surveillance: The monitoring of imports, usually by means of automatic licensing.
Import:
Any resource, intermediate good, or final good or service that buyers in one country purchase from sellers in another country.
1. A good that crosses into a country, across its border, for commercial purposes.
2. A product, which might be a service that is provided to domestic residents by a foreign producer.
3. To cause a good or service to be an import under definitions 1 and/or 2.
Import-competing: Refers to an industry that competes with imports. That is, in a two-good model with trade, one good is the export good and the other is the import-competing goods.
Import-export company: A firm whose business consists mainly of international trade: buying goods in one country and selling them in another, thus both exporting and importing. Same as export-import company.
Imports: The quantity or value of all that is imported into a country.
Import-Substitution Development Strategy: A development strategy followed by many Latin American countries and other LDCs that emphasized import substitution-accomplished through protectionism-as the route to economic growth.
Impossible trinity: The impossibility of combining all three of the following: monetary independence, exchange rate stability, and full financial market integration.
Impost: A tax or tariff. (This is not a commonly used word.)
Improve the terms of trade: To increase the terms of trade; that is, to increase the relative price of exports compared to imports. Because it represents an increase in what the country gets in return for what it gives up, this is associated with an improvement in the country's welfare, although whether that actually occurs depends on the reason prices changed.
Improve the trade balance: This conventionally refers to an increase in exports relative to imports, which thus causes the balance of trade to become larger if positive or smaller if negative. The terminology ignores that exports drain resources while imports satisfy domestic needs, and reflects instead the association of exports with either accumulation of wealth or jobs.
In kind: Referring to a payment made with goods instead of money.
Income baskets: In the U.S. tax code, income is allocated to one of a number of separate income categories. Losses in one basket may not be used to offset gains i

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