Suppose that the marginal cost of an additional ton of steel produced by a Japanese firm is the same whether the steel is set aside for domestic use or exported abroad. If the price elasticity of demand for steel is greater abroad than it is in Japan, which of the following will be correct?
A) The Japanese firm will sell more steel abroad than they will sell in Japan.
B) The Japanese firm will sell more steel in Japan than they will sell abroad.
C) The Japanese firm will sell steel at a lower price abroad than they will charge domestic users.
D) The Japanese firm will sell steel at a higher price abroad than they will charge domestic users.
E) Insufficient information exists to determine whether the price or quantity will be higher or lower abroad.

Question

Quizplus · Accepted Answer

When the price elasticity of demand is greater abroad, the firm can increase total revenue by lowering the price abroad, as consumers are more responsive to price changes.

Suppose That the Marginal Cost of an Additional Ton of Steel