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Total questions: 54
Worksheet time: 27mins
A monopolistic firm
will never sell a product whose demand is inelastic at the quantity sold.
can sell as much as it wants for any price it determines in the market.
cannot determine the price, which is determined by consumer demand.
cannot sell additional quantity unless it raises the price on each unit.
will always earn a profit in the long run.
Monopolistic competition is associated with
product differentiation.
price-taking behavior.
explicit consideration at the firm level of the strategic impact of other firms' pricing decisions.
high profit margins in the long run.
increasing returns to scale.
Modeling trade in imperfectly competitive industries is problematic because
there is no single generally accepted model of behavior by imperfectly competitive firms.
there are no models of imperfectly competitive behavior.
it is difficult to find an imperfectly competitive firm in the real world.
collusion among imperfectly competitive firms makes usable data rare.
there is only a single model of imperfect competition (monopoly) but imperfect competition can take many forms in the real world.
The simultaneous export and import of widgets by the United States is an example of
intra-industry trade.
increasing returns to scale.
imperfect competition.
inter-industry trade.
the effect of a monopoly on international trade.
When a country both exports and imports a type of commodity, the country is engaged in
intra-industry trade.
increasing returns to scale.
imperfect competition.
inter-industry trade.
an attempt to monopolize the relevant industry.
If there are a large number of firms in a monopolistically competitive industry,
long-run profit will be equal to zero.
the country in which the firms are located can be expected to export the goods they produce.
there will be barriers to entry that prevent addition firms from entering the industry.
the firms will converge production on a standardized product.
there will be a small number of firms that are very large and the rest will be very small.
In an industry where firms experience internal scale economies, the long-run cost of production will depend on
the size of the market.
the size of the labor force.
whether the country engages in intra-industry trade.
individual firms' fixed costs.
whether the country engages in inter-industry trade
If a firm increases its output in the ________ and unit costs ________, then the firm is experiencing ________ of scale.
long-run; decrease; economies
short-run; decrease; economies
long-run; decrease; diseconomies
short-run; decrease; diseconomies
long-run; increase; economies
If a firm increases its output in the ________ and unit costs ________, then the firm is experiencing ________ of scale.
long-run; increase; diseconomies
short-run; decrease; economies
long-run; decrease; diseconomies
short-run; decrease; diseconomies
long-run; increase; economies
If a firm that uses a production process that yields economies of scale charges a price equal to ________, then profit will be ________.
marginal cost; negative
marginal revenue; maximized
marginal cost; maximized
marginal revenue; positive
marginal cost; positive
Firms that produce ________ products must be ________ competitive.
differentiated; imperfectly
differentiated; perfectly
standardized; imperfectly
standardized; perfectly
exported; imperfectly
Imperfectly competitive firms have a demand curve that ________ and a marginal revenue curve that ________ and is ________ the demand curve.
slopes downward; slopes downward; below
is horizontal; is horizontal; the same as
slopes downward; is horizontal; above
is horizontal; slopes downward; below
slopes downward; slopes downward; the same as
Under oligopoly, firms' pricing policies are ________ and, under monopolistic competition, they are ________.
interdependent; independent
independent; interdependent
cooperative; uncooperative
uncooperative; cooperative
profit maximizing; revenue maximizing
Under the model of monopolistic competition, a(an) ________ in the number of firms in the industry will cause ________ to ________.
increase; average price; decrease
increase; average price; increase
increase; average cost; decrease
decrease; markup; decrease
increase; marginal cost; decrease
Under the model of monopolistic competition, a(an) ________ in the number of firms in the industry will cause ________ to ________.
increase; markup; decrease
increase; average price; increase
increase; average cost; decrease
decrease; markup; decrease
increase; marginal cost; decrease
Intra-industry trade is most common in the trade patterns of
the industrial countries of Western Europe.
the developing countries of Asia and Africa.
raw material producers.
China with the rest of the world.
labor-intensive products.
If the market for products produced by firms in a monopolistically competitive industry becomes ________, then there will be ________ firms and each firm will produce ________ output and charge a ________ price.
larger; more; more; lower
larger; fewer; more; lower
larger; fewer; more; higher
larger; more; more; higher
larger; more; less; higher
International trade based on external scale economies in both countries is likely to be carried out by
a relatively large number of price competing firms.
a relatively small number of price competing firms.
a relatively small number of imperfect competitors.
monopolists in each country.
a large number of oligopolists in each country.
International trade based solely on internal scale economies in both countries is likely to be carried out by
monopolists in each country.
a relatively large number of price competing firms.
a relatively small number of price competing firms.
a relatively small number of imperfect competitors.
a large number of oligopolists in each country.
A monopoly firm engaged in international trade will
equate marginal costs with marginal revenues in both domestic and foreign markets.
equate average to local costs.
equate marginal costs with foreign marginal revenues.
equate marginal costs with the highest price the market will bear.
equate marginal costs with the relative world prices.
A monopoly firm will maximize profits by producing where
marginal revenue is the same in domestic and foreign markets.
prices are the same in domestic and foreign markets.
marginal revenue is higher in foreign markets.
marginal revenue is higher in the domestic market.
total revenue from domestic and foreign sales is maximized.
A firm in long-run equilibrium under monopolistic competition will earn
zero economic profits because of free entry.
positive monopoly profits because each sells a differentiated product.
positive oligopoly profits because each firm sells a differentiated product.
negative economic profits because it has economies of scale.
positive economic profit if it engages in international trade.
An industry is characterized by scale economies, and exists in two countries. Should these two countries engage in trade such that the combined market is supplied by one country's industry, then
consumers in both countries would have more varieties and lower prices.
consumers in both countries would have higher prices and fewer varieties.
consumers in the importing country only would have higher prices and fewer varieties.
consumers in the exporting country only would have higher prices and fewer varieties.
consumers in both countries would have fewer varieties at lower prices.
An industry is characterized by scale economies and exists in two countries. In order for consumers of its products to enjoy both lower prices and more variety of choice,
the two countries must engage in international trade with each other.
each country's marginal cost must equal that of the other country.
the marginal cost of this industry must equal marginal revenue in the other.
the monopoly must lower prices in order to sell more.
they must combine to become a multinational corporation.
A product is produced in a monopolistically competitive industry with scale economies. If this industry exists in two countries, and these two countries engage in trade with each other, then we would expect
each country will export different varieties of the product to the other.
the country in which the price of the product is lower will export the product.
the country with a relative abundance of the factor of production in which production of the product is intensive will export this product.
neither country will export this product since there is no comparative advantage.
the countries will trade only with other nations they are not in competition with.
Two countries engaged in trade in products with no scale economies, produced under conditions of perfect competition, are likely to be engaged in
inter-industry trade.
monopolistic competition.
intra-industry trade.
Heckscher-Ohlin trade.
oligopolistic competition
Two countries engaged in trade in products with scale economies, produced under conditions of monopolistic competition, are likely to be engaged in
intra-industry trade.
price competition.
inter-industry trade.
Heckscher-Ohlinean trade.
immiserizing trade.
) We often observe "pseudo-intra-industry trade" between the United States and Mexico. Actually, such trade is consistent with
comparative advantage associated with Heckscher-Ohlin model
oligopolistic markets.
optimal tariff issues.
the Ricardian model of trade.
the specific factors model of trade.
Intra-industry trade will tend to dominate trade flows when which of the following exists?
small differences between relative country factor availabilities
large differences between relative country factor availabilities
homogeneous products that cannot be differentiated
constant cost industries
uneven distribution of abundant resources between two countries
Trade without serious income distribution effects is most likely to happen
in sophisticated manufactures trade between rich countries.
in simple manufactures trade between developing countries.
in sophisticated manufactures trade between rich and poor countries.
in agricultural trade between rich countries.
in labor-intensive industries like clothing.
If the market for products produced by firms in a monopolistically competitive industry becomes ________, then there will be ________ firms and each firm will produce ________ output and charge a ________ price
smaller; fewer; less; higher
smaller; more; less; higher
smaller; more; less; lower
smaller; fewer; less; lower
smaller; fewer; more; higher
In the model of monopolistic competition, if firms have ________ average cost curves, then opening trade will ________ the total number of firms and ________ the average price.
downward sloping; decrease; decrease
downward sloping; decrease; increase
downward sloping; increase; decrease
upward sloping; decrease; increase
upward sloping; increase; decrease
In the model of monopolistic competition, if firms have ________ average cost curves, then opening trade will cause ________ firms to ________ the industry.
different; less efficient; exit
different; more efficient; enter
symmetric; less efficient; exit
symmetric; more efficient; enter
symmetric; less efficient; enter
In the model of monopolistic competition, compared to a firm with a higher marginal cost, a firm with a lower marginal cost will set a ________ price, produce ________ output, and earn ________ profits.
lower; more; more
higher; more; more
lower; less; less
higher; less; less
higher; less; more
In the model of monopolistic competition, compared to a firm with a lower marginal cost, a firm with a higher marginal cost will set a ________ price, produce ________ output, and earn ________ profits.
higher; less; less
lower; more; more
higher; more; more
lower; less; less
higher; less; more
In the model of monopolistic competition, an increase in industry output will cause individual firms' demand curves to become ________, which will ________ demand for higher-priced goods and ________ demand for lower-priced goods.
flatter; reduce; increase
steeper; reduce; increase
flatter; increase; reduce
steeper; increase; reduce
horizontal; reduce; reduce
In the model of monopolistic competition, an increase in industry output will ________ producers of higher-priced goods and ________ producers of lower-priced goods.
harm; benefit
benefit; harm
harm; harm
benefit; benefit
benefit; have no effect on
In the model of monopolistic competition, an increase in industry output will ________ market shares and ________ profits of producers of higher-priced goods and will ________ market shares and ________ profits of producers of lower-priced goods.
reduce; reduce; increase; increase
increase; increase; reduce; reduce
increase; reduce; increase; reduce
reduce; increase; reduce; increase
reduce; increase; increase; reduce
In the model of monopolistic competition, trade costs between countries will cause domestic and foreign markets to have ________ prices, ________ quantities sold, and ________ profit levels.
different; different; different
identical; different; different
different; different; identical
identical; different; identical
identical; identical; different
In the model of monopolistic competition, trade costs between countries cause
marginal costs of exported goods to exceed the marginal costs of goods sold domestically.
marginal costs of goods sold domestically to exceed the marginal costs of exported goods.
all firms that can earn a profit on domestic sales to export their goods at lower prices.
all firms that can earn a profit on domestic sales to export their goods at higher prices.
countries to negotiate the elimination of trade costs by mutual subsidization of trade.
In the model of monopolistic competition, trade costs between countries cause
some firms that can earn a profit on domestic sales to refrain from exporting their goods.
prices of goods sold domestically to exceed the prices of exported goods.
marginal costs of goods sold domestically to exceed the marginal costs of exported goods.
all firms that can earn a profit on domestic sales to export their goods at higher prices.
countries to negotiate the elimination of trade costs by mutual subsidization of trade.
The most common form of price discrimination in international trade is
dumping.
non-tariff barriers.
Voluntary Export Restraints.
preferential trade arrangements.
product boycotts.
If an industry is imperfectly competitive, and markets are segmented then
a firm may find that it is profitable to engage in dumping.
a firm may find that international trade is unprofitable.
a firm may find that it should promote scale economies.
a firm may find that it has lost its comparative advantage
a firm may find that it should become more specialized.
Complaints are often made to the International Trade Commission concerning foreign "dumping" practices. These complaints typically claim that
U.S. firms are harmed by the unfair pricing of foreign exporters.
foreign companies are charging exorbitant prices that are higher than the true value of the products.
foreign companies are charging prices that are lower than prices they charge countries other than the U.S.
U.S. consumers are harmed by the lack of quality control or health concerns in foreign countries.
U.S. consumers cannot differentiate between the foreign and domestic goods.
A corporation is considered a multinational ________ if ________.
parent; it owns more than 10% of a foreign firm
parent; more than 10% of its stock is held by a foreign company
child; more than 10% of its stock is held by a foreign company
child; more than 50% of its stock is held by a foreign company
monopolist; it owns more than 50% of a foreign firm
A corporation is considered a multinational ________ if ________.
affiliate; more than 10% of its stock is held by a foreign company
parent; more than 10% of its stock is held by a foreign company
child; more than 10% of its stock is held by a foreign company
child; more than 50% of its stock is held by a foreign company
monopolist; it owns more than 50% of a foreign firm
Consider the following two cases. In the first, a U.S. firm purchases 18% of a foreign firm. In the second, a U.S. firm builds a new production facility in a foreign country. Both are ________, with the first referred to as ________ and the second as ________.
foreign direct investment (FDI) outflows; greenfield; brownfield
foreign direct investment (FDI) inflows; greenfield; brownfield
foreign direct investment (FDI) outflows; brownfield; greenfield
foreign direct investment (FDI) inflows; brownfield; greenfield
foreign direct investment (FDI); inflows; outflows
When a multinational affiliate replicates production in a foreign country it is called ________ foreign direct investment.
horizontal
vertical
transitional
bisectional
direct
When a multinational affiliate replicates elements of a production process in a foreign country it is called ________ foreign direct investment.
vertical
horizontal
transitional
bisectional
direct
Foreign outsourcing is
the transfer of operations to foreign contractors.
an example of internalization.
an example of foreign direct investment
currently illegal in the U.S.
the substitution of immigration for foreign direct investment.
A firm is more likely to engage in horizontal foreign direct investment if
trade costs are low and firms experience constant returns to scale in production.
trade costs are high and there are internal economies of scale.
trade costs are low and there are external economies of scale.
trade costs are low and there are internal economies of scale.
trade costs are high and there are external economies of scale.
A firm's foreign direct investment decisions are, in the case of horizontal FDI, strongly influenced by ________ and, in the case of vertical FDI, strongly influenced by ________.
labor costs; trade costs
materials costs; labor costs
production costs; materials costs
production costs; trade costs
trade costs; production costs
Product differentiation and internal economies of scale yield gains from trade in the form of
the proximity-concentration effect.
a proliferation of competitive firms.
higher profits and lower trade costs.
lower production costs and a greater variety of goods.
the substitution of immigration for foreign direct investment.
During the past decade, U.S. imports of business services have ________, U.S. exports of business services have ________, and U.S. net exports of business services have ________.
increased; increased; not changed
increased; decreased; decreased
decreased; increased; increased
decreased; decreased; increased
increased; increased; increased
