"In the shift from no trade to free trade, the monopolistic competition model can predict which specific varieties of products will be produced by which countries, and the models based on substantial scale economies can predict which countries will be the major production locations for a product." Are these claims correct? Explain briefly.
What will be an ideal response?
POSSIBLE RESPONSE: The monopolistic competition model indicates that product differentiation can be a basis for successful exporting, but it does not predict which specific varieties of a differentiated product will be produced by which country. The model can be used to predict the changes in the total number of varieties, but the model does not address specific country characteristics. The models based on substantial scale economies (internal or external) indicate that production tends to be concentrated at a small number of locations, but they do not precisely identify the actual locations. Often historical luck and government policies play an important role in determining which location will develop to capture export markets and become the low-cost producer. So, these claims are not correct.
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Which of the four government policies to stimulate saving is essential? That is, which policy can on its own, regardless of the other policies, determine the level of the national saving rate?
What will be an ideal response?
How does monopoly product quality compare to the quality a social planner would choose? a. The monopolist targets the marginal consumer's valuation of quality, whereas the social planner targets the average consumer's. This leads the monopolist to make inefficiently low-quality products. b. The monopolist targets the marginal consumer's valuation of quality, whereas the social planner targets
the average consumer's. This leads the monopolist to make inefficiently high-quality products. c. There is no difference due to a standard neutrality argument. d. None of the above.
If a positive externality were present in a market, the social benefit curve would be:
A. the same as the private demand curve. B. above the private demand curve. C. below the private demand curve. D. Cannot say without more information.
The Human Resources department at a firm has two job candidates for one position. Both candidates went to the same college, took the same classes, and have the same academic record. They both performed well in the interview and said that they see the job as a long-term position. One applicant is male; the other is female. Historically within the firm, women quit their jobs at higher rates than do men. Because of this, the firm fills the position with the male candidate. What kind of discrimination is this?
A. consumer discrimination B. employee discrimination C. statistical discrimination D. employer discrimination E. None of these is examples of discrimination.