Fight Continues This Summer to Lower Prescription Drug Prices

1. Why could U.S. pharmaceutical companies raise prices for prescription drugs? Comment on the market outcome in terms of market price, quantity, consumer surplus, producer surplus and deadweight loss. (hint: to simplify your analysis, you may assume a pharmaceutical firm to be a monopoly when analysing the market outcome.) 2. Critically discuss how the price ceiling influences market price, quantity and the profit of U.S. pharmaceutical companies. 3. Why do not those U.S. pharmaceutical companies like the proposal of importing prescription drugs? (Hint: consider about what happens to the market structure when the same medicine is allowed to be imported.) a. Explain how importing will influence the drug price. b. Explain how such price change influences the pharmaceutical companies’ profit, market efficiency and social welfare. 4. Conclude your essay by commenting if you support the proposal?

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