3. Read the following article and answer the questions below: Drug Companies Question Safety of Foreign Drugs Washington, D.C. – The Healthy America Coalition, a pharmaceutical think-tank, released a study today questioning the quality of foreign drugs. "We're just not sure what those foreign companies are putting in their medications," said Polly Pharmarep, a spokesperson for the Healthy America Coalition. The report alleges that medical companies based in the country of Zargadee have less stringent quality control standards than American firms. Ms. Pharmarep explained, "Quality control to the standards of American pharmaceutical production is not mandated by the government of Zargadee. When you take Zargadeean drugs, you rely on the integrity of individual manufacturers." Zargadeean pharmaceutical companies disagreed. "Our manufacturing tolerances are much lower than our comparable U.S. counterparts' tolerances," said Zaggy Zargawhoop, CEO of Zarg Drugs Ltd. “Also, the regulations in Zargadee for chemical production are much more stringent in some instances than U.S. regulations." Thus far, the Food and Drug Administration declined to allow drugs produced in Zargadee to be marketed legally in the United States. "As yet, we have received no evidence that drugs from Zargadee are either less effective or less safe than pharmaceuticals manufactured and developed here in the United States," said an FDA spokesperson. "However, due to the safety concerns of U.S. producers, we will continue to exclude foreign pharmaceuticals produced in Zargadee from the U.S. market." The Healthy America Coalition supports the FDA's position. "We wholeheartedly support the FDA's determination to safeguard the nation's pharmaceutical supply," said Ms. Pharmarep. Cranky Consumer, spokesperson for the American Consumer, a consumer advocacy group, commented on the study: "This is just another attempt by the greedy drug companies to gouge drug consumers by preventing the importation of foreign drugs from Zargadee." Questions Suppose foreign pharmaceutical distributors from Zargadee are currently prohibited from selling drugs in the U.S. Assume that foreign drugs are identical to drugs produced domestically. Suppose that the U.S. does not import drugs produced in Zargadee from any other country. a. Use supply and demand analysis to show how the exclusion of imported drugs from Zargadee affects the equilibrium price and quantity of drugs in the U.S. market. b. How much does the quantity of drug imports decrease as a result of the regulation? Explain using your graph. c. According to the article, are consumers in favor of drug importation from Zargadee? Explain using your graph. d. According to the article, are U.S. drug producers in favor of drug importation from Zargadee? Explain using your graph. e. If Congress wanted to maximize total surplus, should it allow importation or not? Explain using your graph. f. If drugs from Zargadee were not identical to other drugs, briefly describe how that difference would be a problem for your analysis.