(Figure: Market for Lithotripters) Refer to the figure. Suppose that a German manufacturer can sell its kidney lithotripter in two markets: Country X and Country Y. If this firm is interested in maximizing profits, it should set a price of ________ in Country X and ________ in Country Y.
A) d; z
B) b; d
C) b; z
D) a; d

Question

(Figure: Market for Lithotripters) Refer to the figure. Suppose that a German manufacturer can sell its kidney lithotripter in two markets: Country X and Country Y. If this firm is interested in maximizing profits, it should set a price of ________ in Country X and ________ in Country Y. 
A) d; z 
B) b; d 
C) b; z 
D) a; d

Quizplus · Accepted Answer

The German manufacturer should charge a higher price in Country X (b) where demand is more inelastic and a lower price in Country Y (z) where demand is more elastic. This will maximize profits as the firm can charge a higher price where demand is less flexible and a lower price where demand is more responsive to changes in price.

(Figure: Market for Lithotripters) Refer to the Figure