Giocattolo is an Italian firm, and it is the only seller of toy cars in Italy and Spain. Suppose that when the price of toy cars increases, Spanish children more readily replace them with toy motorbikes than Italian children. Thus, the demand for toy cars in Spain is more elastic than in Italy. The following graphs show the demand curves for toy cars in Italy (D) and Spain (Ds) and marginal revenue curves in Italy (MR) and Spain ( MRs). Giocattolo's marginal cost of production (MC), depicted as the grey horizontal line in both graphs, is $8, and the resale of toy cars from Spain to Italy is prohibited. Assume there are no fixed costs in production, so marginal cost equals average total cost (ATC). PRICE (Dollars per boy car) 20 16 **RD- 28 24 2 Italy MC-ATC MR 4 5 8 10 12 14 16 18 20 QUANTITY (Millions of low cars) PRICE (Dollars per toy car 36 32 24 20 10 12 0 2 Spain MR MC-ATC 4 6 8 10 12 14 16 18 20 QUANTITY (Millions of tov cars)