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Hence, in this context, free entry leads to excessentry.3
5. Consider a U.S. pharmaceutical °rm with a patented drug that is sold in both the U.S. and Canada. Inthe U.S., market demand is given byQU(p) = 104°2p. In Canada, it isQC(p) = 66°3p. The drug canbe produced and sold in either country at a marginal cost of 2. All prides/costs are measured in U.S.dollars.(a) Suppose the °rm can price discriminate by charging di/erent prices in each country (assume ar-bitrage is impossible).Assuming the °rm maximizes pro°t, what prices will be charged in eachcountry? What pro°t does the °rm obtain? What is the consumer surplus in each country?