Question 1

Firms that produce ________ products must be ________ competitive.

Accepted Answer

A)   differentiated; imperfectly
B)   differentiated; perfectly
C)   exported; imperfectly
D)   standardized; imperfectly
E)   standardized; perfectly A

Question 2

An imperfectly competitive firm has the following total cost curve: C = 100 + 4Q. What is marginal cost equal to when Q = 10?

Accepted Answer

MC = 4 for any Q

Question 3

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.

Accepted Answer

A)   lower; less; less
B)   higher; less; more
C)   lower; more; more
D)   higher; more; more
E)   higher; less; less C

Question 4

Imagine scale economies were not only external to firms, but were also external to individual countries. That is, the larger the worldwide industry (regardless of where firms or plants are located), the cheaper would be the per-unit cost of production. Describe what world trade would look like in this case.

Accepted Answer

The answer of Imagine scale economies were not only external...

Question 5

It is possible that trade based on external scale economies may leave a country worse off than it would have been without trade. Explain how this could happen.

Accepted Answer

The answer of It is possible that trade based on...

Question 6

Two countries engaged in trade in products with no scale economies, produced under conditions of perfect competition, are likely to be engaged in

Accepted Answer

A)   Heckscher-Ohlin trade.
B)   oligopolistic competition
C)   monopolistic competition.
D)   intra-industry trade.
E)   inter-industry trade.

Question 7

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.

Accepted Answer

A)   larger; fewer; more; higher
B)   larger; more; less; higher
C)   larger; fewer; more; lower
D)   larger; more; more; lower
E)   larger; more; more; higher

Question 8

In the model of monopolistic competition, an increase in industry output will ________ producers of higher-priced goods and ________ producers of lower-priced goods.

Accepted Answer

A)   harm; benefit
B)   benefit; benefit
C)   benefit; harm
D)   benefit; have no effect on
E)   harm; harm

Question 9

Trade without serious income distribution effects is most likely to happen

Accepted Answer

A)   in simple manufactures trade between developing countries.
B)   in sophisticated manufactures trade between rich countries.
C)   in sophisticated manufactures trade between rich and poor countries.
D)   in agricultural trade between rich countries.
E)   in labor-intensive industries like clothing.

Question 10

A firm is more likely to engage in horizontal foreign direct investment if

Accepted Answer

A)   trade costs are low and firms experience constant returns to scale in production.
B)   trade costs are low and there are internal economies of scale.
C)   trade costs are high and there are internal economies of scale.
D)   trade costs are high and there are external economies of scale.
E)   trade costs are low and there are external economies of scale.

Question 11

-Refer to above figure. Given the opportunity to sell at world prices, the marginal (opportunity) cost of selling a ton domestically is what?

Accepted Answer

The answer of 
-Refer to above figure. Given the opportunity...

Question 12

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 ________.

Accepted Answer

A)   materials costs; labor costs
B)   trade costs; production costs
C)   labor costs; trade costs
D)   production costs; trade costs
E)   production costs; materials costs

Question 13

What is the nature of the proximity-concentration tradeoff that firms have to deal with then making decisions regarding foreign direct investment?

Accepted Answer

The answer of What is the nature of the proximity-concentration...

Question 14

If a firm increases its output in the ________ and unit costs ________, then the firm is experiencing ________ of scale.

Accepted Answer

A)   short run; decrease; economies
B)   long run; increase; diseconomies
C)   short run; decrease; diseconomies
D)   long run; increase; economies
E)   long run; decrease; diseconomies

Question 15

-Refer to above figure. The monopolist can export as much as it likes of its steel at the world price of $5/ton. How much steel will the monopolist sell, and at what price?

Accepted Answer

The answer of 
-Refer to above figure. The monopolist can...

Question 16

A firm in long-run equilibrium under monopolistic competition will earn

Accepted Answer

A)   positive oligopoly profits because each firm sells a differentiated product.
B)   zero economic profits because of free entry.
C)   negative economic profits because it has economies of scale.
D)   positive economic profit if it engages in international trade.
E)   positive monopoly profits because each sells a differentiated product.

Question 17

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 ________.

Accepted Answer

A)   foreign direct investment (FDI) ; inflows; outflows
B)   foreign direct investment (FDI)  inflows; brownfield; greenfield
C)   foreign direct investment (FDI)  outflows; brownfield; greenfield
D)   foreign direct investment (FDI)  outflows; greenfield; brownfield
E)   foreign direct investment (FDI)  inflows; greenfield; brownfield

Question 18

If a firm that uses a production process that yields economies of scale charges a price less than ________, then profit will be ________.

Accepted Answer

A)   marginal cost; positive
B)   average cost; negative
C)   marginal revenue; positive
D)   marginal cost; maximized
E)   marginal revenue; maximized

Question 19

In the model of monopolistic competition, trade costs between countries cause

Accepted Answer

A)   marginal costs of goods sold domestically to exceed the marginal costs of exported goods.
B)   countries to negotiate the elimination of trade costs by mutual subsidization of trade.
C)   prices of goods sold domestically to exceed the prices of exported goods.
D)   some firms that can earn a profit on domestic sales to refrain from exporting their goods.
E)   all firms that can earn a profit on domestic sales to export their goods at higher prices.

Question 20

Under the model of monopolistic competition, a(an) ________ in the number of firms in the industry will cause ________ to ________.

Accepted Answer

A)   increase; average price; decrease
B)   increase; average price; increase
C)   increase; average cost; decrease
D)   decrease; markup; decrease
E)   increase; marginal cost; decrease

Exam 8: Firms in the Global Economy: Export Decisions, Outsourcing, and Multinational Enterprises

Firms that produce products must be competitive.

An imperfectly competitive firm has the following total cost curve: C = 100 + 4Q. What is marginal cost equal to when Q = 10?

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.

It is possible that trade based on external scale economies may leave a country worse off than it would have been without trade. Explain how this could happen.

Two countries engaged in trade in products with no scale economies, produced under conditions of perfect competition, are likely to be engaged in

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.

In the model of monopolistic competition, an increase in industry output will producers of higher-priced goods and producers of lower-priced goods.

Trade without serious income distribution effects is most likely to happen

A firm is more likely to engage in horizontal foreign direct investment if

-Refer to above figure. Given the opportunity to sell at world prices, the marginal (opportunity) cost of selling a ton domestically is what?

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 .

What is the nature of the proximity-concentration tradeoff that firms have to deal with then making decisions regarding foreign direct investment?

If a firm increases its output in the and unit costs , then the firm is experiencing of scale.

-Refer to above figure. The monopolist can export as much as it likes of its steel at the world price of $5/ton. How much steel will the monopolist sell, and at what price?

A firm in long-run equilibrium under monopolistic competition will earn

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 .

If a firm that uses a production process that yields economies of scale charges a price less than , then profit will be .

In the model of monopolistic competition, trade costs between countries cause

Under the model of monopolistic competition, a(an) in the number of firms in the industry will cause to .