How does free trade relate to the theory of oligopoly?
Free trade increases the number of producers of a product, which keeps prices closer to marginal cost. The more producers there are in a market, the more difficult it will be for firms to collude. Because collusion moves the market price and quantity away from socially optimal levels, free trade enhances social welfare.
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Comparative advantage explains how two nations can benefit from trade
a. True b. False Indicate whether the statement is true or false
Something that provides disutility is called a
A) good. B) want. C) need. D) bad. E) none of the above
Limiting net external wealth effects could be accomplished by limiting movements in the exchange rate. What measure might address this situation?
A) devaluing the currency B) keeping nominal interest rates exactly 1% higher than one's trading partners C) borrowing only in U.S. dollars D) pegging the exchange rate to the currency of the largest creditor nation
Which case below best represents a case of price discrimination?
A. An insurance company offers discounts to safe drivers B. A major airline sells tickets to senior citizens at lower prices than to other passengers C. A professional baseball team pays two players with identical batting averages different salaries D. A utility company charges less for electricity used during "off-peak" hours, when it does not have to operate its less-efficient generating plants