A pharmaceutical firm faces the following monthly demands in the U.S. and Mexican markets for one of its patented drugs:
QUS = 300,000-5,000PUS
QX = 240,000-8,000PX
where quantities represent the number of prescriptions. Assume that resale or arbitrage among markets is impossible and marginal cost is constant at $2 per prescription in both markets. Monthly fixed costs are $1 million in the U.S. and $500,000 in Mexico.
Find the profit-maximizing prices and quantities in each market. What are the firm's total profits?