(Third degree price discrimination) Feed-forward Drug Corporation sells a major drug in Europe and in the United States. Because of legal restrictions, the drug cannot be bought in one country and sold in another. The demand curve for the drug in Europe is Pe = 12 - Qe, where Pg is price in $ per pound in Europe and Qe is the amount in millions of pounds sold there. The demand curve for the drug in US is Pu = 30 - 2Qu . where Py is price in $ per pound in the US and Qu is the amount in millions of pounds sold there. The total cost in millions of dollars of producing the drug for sale worldwide is TC = 6 + 2(QE + Qu). a) Derive the firm's total profit function including both Europe and the US in it as a function of Qe and Qu - [4 marks] b) Calculate the optimal number of drugs to sell in Europe as well as in the US. [6 marks] c) Calculate the optimal prices to charge in Europe as well as in the US. [4 marks] d) Calculate the firm's total profit under this price discrimination scheme. [3 marks] Question 3. (Removing price discrimination) Suppose the Feed-forward Drug Corporation in question 2 cannot price discriminate due to the fact that the two markets cannot be segmented and sealed. a) Derive the firm's single demand function under no price discrimination. (Hint: No price discrimination implies that pe = Py = P. Use the two demand curves from question 2 to find total quantity sold: Q=Q2 + Qu which is the demand under no price discrimination when P is isolated on one side.) [6 marks] b) Derive the Feed-forward Drug Corporation's profit function under no price discrimination as a function of Q. (Hint: Profit=Px Q-TC where Q=Q2 + Qy and P, = Py = P.) [5 marks] c) If managers do not engage in price discrimination, which optimal price and output they would choose? [4 marks] d) Calculate the firm's optimal profit under no price discrimination. Is it greater than the profit under price discrimination you calculated in question 2? [3 marks]