A European firm produces cars at a marginal cost of $25,000 and sells the product in two markets (the US and EU). The demand in the US is while the demand in the EU is . What price should the firm charge in the US?

Question

Quizplus · Accepted Answer

The firm should charge a price that maximizes profit, which occurs where marginal cost equals marginal revenue. Given the options, $37,500 is likely the price that aligns with this condition in the US market.

A European Firm Produces Cars at a Marginal Cost of $25,000