Question
A firm is selling in two separate markets, Domestic and Foreign, denoted by D and F. Marginal costs are the same in both markets. The
A firm is selling in two separate markets, Domestic and Foreign, denoted by D and F. Marginal costs are the same in both markets. The elasticity of demand in market D is 1.1 and the elasticity of demand in market F is 1.8. Assume that the firm is maximizing its profit. Which is larger, the price PD that the firm charges in market D, or the price PF that it charges in market F? A. PD is greater than PF B. PD is less than PF C. PD is equal to PF D. We do not have enough information to establish whether any of the three previous answers is necessarily true.
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