In addition to the positive welfare effects that free trade has on an economy, there are a variety of other benefits of international trade. Consider the following scenario:
Without free trade, Sapphira has market power as a local producer. Once free trade is implemented in the local economy, Sapphira is no longer able to raise its prices above competitive levels.
The previous scenario represents which of the following benefits of free trade?
a. Lower costs through economies of scale
b. Increased competition
c. Increased variety of goods
d. An enhanced flow of ideas
Answer: b. Increased competition
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Sharon purchases two products, X and Y, with a given fixed budget. The marginal utility she receives from the last unit of X she consumes is 60 utils, and the marginal utility she receives from the last unit of Y she consumes is 30 utils. The price of X is $2.00, and the price of Y is $1.00. Based on the equal marginal principle, these data suggest that Sharon
A. should buy more Y and less X. B. should buy less Y and X. C. should buy more X and less Y. D. is maximizing her total utility from the given fixed budget.
The study by economists Cox and Alm found
a. the gap between rich and poor shrinks greatly if using after-tax income compared with pre-tax income. b. the gap between rich and poor shrinks slightly if using after-tax income compared with pre-tax income. c. the gap between rich and poor widens slightly if using after-tax income compared with pre-tax income. d. the gap between rich and poor widens greatly if using after-tax income compared with pre-tax income.
Follow a $1 billion purchase of U.S. Treasury bonds by the Fed from commercial banks. Discuss the changes that occur to the balance sheet of the banking system and the balance sheet of the Fed.
What will be an ideal response?
The demand curve in monopolistic competition slopes downward because of:
A. strong barriers to entry. B. product differentiation. C. the small number of firms. D. government regulation.