Wobble's Weebles is the only producer of weebles.It makes weebles at constant marginal cost c(where c 0)and sells them at a price of p₁ per weeble in market 1 and at a price of p₂ per weeble in market 2.The demand curve for weebles in market 1 has a constant price elasticity of demand equal to -2.The demand curve for weebles in market 2 has a constant price elasticity equal to -3/2.The ratio of the profit-maximizing price in market 1 to the profit-maximizing price in market 2 is A)2/3. B)1/3. C)3/2. D)3. E)dependent on the value of c.

Question

Wobble's Weebles is the only producer of weebles.It makes weebles at constant marginal cost c(where c > 0)and sells them at a price of p₁ per weeble in market 1 and at a price of p₂ per weeble in market 2.The demand curve for weebles in market 1 has a constant price elasticity of demand equal to -2.The demand curve for weebles in market 2 has a constant price elasticity equal to -3/2.The ratio of the profit-maximizing price in market 1 to the profit-maximizing price in market 2 is A)2/3. B)1/3. C)3/2. D)3. E)dependent on the value of c.

Quizplus · Accepted Answer

The profit-maximizing price ratio is determined by the inverse of the absolute values of the elasticities: |E1|/|E2| = 2/(3/2) = 4/3, which simplifies to 2/3.

Wobble's Weebles Is the Only Producer of Weebles