Problem 17.3 A proposal has been advanced to limit advertising of pharmaceutical prices to prevent unfair pricing

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Question:

Problem 17.3

A proposal has been advanced to limit advertising of pharmaceutical prices to prevent unfair pricing by national chains. You estimate that limits on price advertising will change the price elasticity of demand from 5.63 to 4.43. The marginal cost of a typical prescription is $40. Atypical small pharmacy fills 25 prescriptions per day. A typical consumer fills20 prescriptions per year. What economic effects will the limit have on consumers and on pharmacists? Which group is likely to be the more effective advocate for its position?

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