1. Many pharmaceuticals produced in the United States are sold at lower prices i
ID: 1254982 • Letter: 1
Question
1. Many pharmaceuticals produced in the United States are sold at lower prices in other countries than in the United States. Proposed legislation would allow drugs sold by U.S. firms in Canada to be re-imported to the United States at prices available in Canada. If such legislation passed, which of the following would most likely occur?
A. The price at which pharmaceuticals are sold in the United States will fall, and the price at which they are sold in Canada will rise.
B. The prices at which pharmaceuticals are sold in the United States will fall to the levels that now exist in Canada.
C. The profits earned by pharmaceutical companies will not be affected because their patents give them monopoly power in supplying many types of drugs.
Explanation / Answer
This is A In this case, the lower cost in other countries such as Canada will drive the price down in the US while the US now in this market will increase the price in Canada. They will both decrease and increase to a point of equilibrium in the market
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