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Managers at the Ridgeway Corporation produce a medical device that they

sell in Japan, Europe, and the United States. Transportation costs are a

negligible proportion of the product’s total costs. The price elasticity of

demand for the product is -4.0 in Japan, -2.0 in the United States, and

-1.33 in Europe. Because of legal limitations, this medical device, once

sold to a customer in one country, cannot be resold to a buyer in another

country. a. The firm’s vice president for marketing circulates a memo recommending

that the price of the device be $1,000 in Japan, $2,000

in the United States, and $3,000 in Europe. Comment on his

recommendations. b. His recommendations are accepted. Sales managers send reports to

corporate headquarters saying that the quantity of the devices being

sold in the United States is lower than expected. Comment on their

reports. c. After considerable argument, the U.S. sales manager agrees to lower

the price in the United States to $1,500. Is this a wise decision? Why or

why not? d. Can you be sure that managers are maximizing profit? Why or why not?