A Canadian aluminum firm sells aluminum in the United States and Japan. Since the United States buys aluminum from more sources than Japan does, the U.S. demand for Canadian aluminum is more elastic than that of Japan. If the Canadian aluminum firm wishes to maximize its profits, it should:

Question

Quizplus · Accepted Answer

Since the U.S. demand for Canadian aluminum is more elastic than that of Japan, the Canadian aluminum firm should charge a lower price in the United States and a higher price in Japan. This is because if the firm charges the same price in both countries, it would lose out on potential profits in Japan where the demand is less elastic. By charging a lower price in the United States, the firm can increase its market share and sell more units, while charging a higher price in Japan where the demand is less elastic would allow the firm to maximize its profits in that market.

A Canadian Aluminum Firm Sells Aluminum in the United States