8. International price discrimination Igrushka is a Russian firm, and it is the only seller of wooden dolls in Russia and France. Suppose that when the price of wooden dolls increases, French children more readily replace them with porcelain dolls than Russian children. Thus, the demand for wooden dolls in France is more elastic than in Russia. The following graphs show the demand curves for wooden dolls in Russia (DR) and France (DF) and marginal revenue curves in Russia (MRR) and France (MRP). Igrushka's marginal cost of production (MC), depicted as the grey horizontal line in both graphs, is $12, and the resale of wooden dolls from France to Russia is prohibited. Assume there are no fixed costs in production, so marginal cost equals average total cost (ATC). PRICE (Dollars per wooden doll) 40 38 32 28 24 20 16 12 Russia MC=ATC ? PRICE (Dollars per wooden doll) 40 38 32 28 24 20 18 12 France MC=ATC 4 MRR DR MR- DE 0 + 0 + + 0 2 4 6 8 10 12 14 16 18 20 0 2 QUANTITY (Millions of wooden dolls) 4 6 8 10 12 14 18 18 QUANTITY (Millions of wooden dolls) 20 Suppose that as a nondiscriminating seller, Igrushka charges the same price of $20 per wooden doll in each of the two markets. In the following table, complete the third column by determining the quantity sold in each country at a price of $20 per wooden doll. Next, complete the fourth column by calculating the total profit and the profit from each country under a single price. Price Discrimination Country Russia France Price (Dollars per wooden doll) Single Price Quantity Sold (Millions of wooden dolls) Profit (Millions of dollars) Price Quantity Sold (Dollars per wooden doll) (Millions of wooden dolls) Profit (Millions of dollars) 20 20 Total N/A N/A N/A N/A Suppose that as a profit-maximizing firm, Igrushka decides to price discriminate by charging a different price in each market, while its marginal cost of production remains $12 per toy. Complete the last three columns in the previous table by determining the profit-maximizing price, the quantity sold at that price, the profit in each country, and total profit if Igrushka price discriminates. Igrushka charges a higher price in the market with a relatively elastic demand curve. True or False: Under price discrimination, Igrushka is not dumping wooden dolls into the French market. True False
8. International price discrimination Igrushka is a Russian firm, and it is the only seller of wooden dolls in Russia and France. Suppose that when the price of wooden dolls increases, French children more readily replace them with porcelain dolls than Russian children. Thus, the demand for wooden dolls in France is more elastic than in Russia. The following graphs show the demand curves for wooden dolls in Russia (DR) and France (DF) and marginal revenue curves in Russia (MRR) and France (MRP). Igrushka's marginal cost of production (MC), depicted as the grey horizontal line in both graphs, is $12, and the resale of wooden dolls from France to Russia is prohibited. Assume there are no fixed costs in production, so marginal cost equals average total cost (ATC). PRICE (Dollars per wooden doll) 40 38 32 28 24 20 16 12 Russia MC=ATC ? PRICE (Dollars per wooden doll) 40 38 32 28 24 20 18 12 France MC=ATC 4 MRR DR MR- DE 0 + 0 + + 0 2 4 6 8 10 12 14 16 18 20 0 2 QUANTITY (Millions of wooden dolls) 4 6 8 10 12 14 18 18 QUANTITY (Millions of wooden dolls) 20 Suppose that as a nondiscriminating seller, Igrushka charges the same price of $20 per wooden doll in each of the two markets. In the following table, complete the third column by determining the quantity sold in each country at a price of $20 per wooden doll. Next, complete the fourth column by calculating the total profit and the profit from each country under a single price. Price Discrimination Country Russia France Price (Dollars per wooden doll) Single Price Quantity Sold (Millions of wooden dolls) Profit (Millions of dollars) Price Quantity Sold (Dollars per wooden doll) (Millions of wooden dolls) Profit (Millions of dollars) 20 20 Total N/A N/A N/A N/A Suppose that as a profit-maximizing firm, Igrushka decides to price discriminate by charging a different price in each market, while its marginal cost of production remains $12 per toy. Complete the last three columns in the previous table by determining the profit-maximizing price, the quantity sold at that price, the profit in each country, and total profit if Igrushka price discriminates. Igrushka charges a higher price in the market with a relatively elastic demand curve. True or False: Under price discrimination, Igrushka is not dumping wooden dolls into the French market. True False
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
not use ai please
Transcribed Image Text:8. International price discrimination
Igrushka is a Russian firm, and it is the only seller of wooden dolls in Russia and France. Suppose that when the price of wooden dolls increases,
French children more readily replace them with porcelain dolls than Russian children. Thus, the demand for wooden dolls in France is more elastic than
in Russia.
The following graphs show the demand curves for wooden dolls in Russia (DR) and France (DF) and marginal revenue curves in Russia (MRR) and
France (MRP). Igrushka's marginal cost of production (MC), depicted as the grey horizontal line in both graphs, is $12, and the resale of wooden
dolls from France to Russia is prohibited. Assume there are no fixed costs in production, so marginal cost equals average total cost (ATC).
PRICE (Dollars per wooden doll)
40
38
32
28
24
20
16
12
Russia
MC=ATC
?
PRICE (Dollars per wooden doll)
40
38
32
28
24
20
18
12
France
MC=ATC
4
MRR
DR
MR-
DE
0
+
0
+
+
0
2 4 6 8 10 12 14 16 18 20
0
2
QUANTITY (Millions of wooden dolls)
4 6 8 10 12 14 18 18
QUANTITY (Millions of wooden dolls)
20
Suppose that as a nondiscriminating seller, Igrushka charges the same price of $20 per wooden doll in each of the two markets.
In the following table, complete the third column by determining the quantity sold in each country at a price of $20 per wooden doll. Next, complete
the fourth column by calculating the total profit and the profit from each country under a single price.
Price Discrimination
Country
Russia
France
Price
(Dollars per
wooden doll)
Single Price
Quantity Sold
(Millions of
wooden dolls)
Profit
(Millions of
dollars)
Price
Quantity Sold
(Dollars per
wooden doll)
(Millions of
wooden dolls)
Profit
(Millions of
dollars)
20
20
Total
N/A
N/A
N/A
N/A
Suppose that as a profit-maximizing firm, Igrushka decides to price discriminate by charging a different price in each market, while its marginal cost of
production remains $12 per toy.
Complete the last three columns in the previous table by determining the profit-maximizing price, the quantity sold at that price, the profit in each
country, and total profit if Igrushka price discriminates.
Igrushka charges a higher price in the market with a relatively
elastic demand curve.
True or False: Under price discrimination, Igrushka is not dumping wooden dolls into the French market.
True
False
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education