Suppose That the Marginal Cost of an Additional Ton of Steel

question 105

Multiple Choice

Suppose that the marginal cost of an additional ton of steel produced by a Japanese firm is the same whether the steel is set aside for domestic use or exported abroad. If the price elasticity of demand for steel is greater abroad than it is in Japan, which of the following will be correct?

• A) The Japanese firm will sell more steel abroad than they will sell in Japan.
• B) The Japanese firm will sell more steel in Japan than they will sell abroad.
• C) The Japanese firm will sell steel at a lower price abroad than they will charge domestic users.
• D) The Japanese firm will sell steel at a higher price abroad than they will charge domestic users.
• E) Insufficient information exists to determine whether the price or quantity will be higher or lower abroad.

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Definitions:

Diminished Sensitivity

A reduction in the ability to perceive or respond to stimuli.

Perceptual Set

A readiness to perceive certain aspects of available sensory data and to ignore others, influenced by expectations, experiences, and context.

French Fries

Deep-fried strips of potatoes, often seasoned with salt, commonly served as a fast-food side dish or snack.

Difference Threshold

The minimum difference in stimulation that a person can detect 50% of the time.