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.
A) d; z
B) b; d
C) b; z
D) a; d

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.
A) d; z 
B) b; d 
C) b; z 
D) a; d

Quizplus · Accepted Answer

The German manufacturer should set a price where the marginal revenue (MR) equals marginal cost (MC) in both markets in order to maximize profits. From the graph, we can see that the profit-maximizing price in Country X is at point b, where MR=MC. Similarly, in Country Y, the profit-maximizing price is at point z, where MR=MC. Therefore, the German manufacturer should set a price of b in Country X and a price of z in Country Y to maximize profits. Choice C is the only option that matches these prices.

Figure: Market for Lithotripters Refer to the Figure