A company produces and sells video games in two separate geographic markets, the US and Europe. Market research has revealed that at the current price, the elasticity of demand in Europe is -2. The research also estimates that at that same price the elasticity of demand in the US is -0.5. The company is currently charging the same price per copy, P = $100, in the US market and the European market. The marginal cost of production is the same, regardless of where the videogame is sold, and equal to $30 (ignore transportation costs). Should the company raise, reduce or maintain the price of its videogame in Europe? Should the company raise, reduce or maintain the price of its videogame in the US? Explain!

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The company should consider lowering the price of the videogame in Europe and maintaining the price ... View the full answer