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.

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.

Quizplus · Accepted Answer

The German manufacturer should set a price of "b" in both Country X and Country Y in order to maximize profits. This is because "b" is the intersection of the demand curves for both markets, which represents the highest price that consumers in both countries are willing to pay. If the manufacturer were to set a price of "d" in Country X, it would result in a lower quantity sold and lower profits due to the inelastic demand curve in that market. If the manufacturer were to set a price of "a" in Country X, it would result in a higher quantity sold, but at a lower price and lower profits due to the elastic demand curve in that market. Finally, if the manufacturer were to set a price of "z" in Country Y, it would result in a lower quantity sold and lower profits due to the inelastic demand curve in that market.

Figure: Market for Lithotripters Refer to the Figure