A Product Is Produced in a Monopolistically Competitive Industry with Scale

question 56

Multiple Choice

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

• A) the country with a relative abundance of the factor of production in which production of the product is intensive will export this product.
• B) the countries will trade only with other nations they are not in competition with.
• C) the country in which the price of the product is lower will export the product.
• D) neither country will export this product since there is no comparative advantage.
• E) each country will export different varieties of the product to the other.

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Definitions:

Expectancy Theory

A motivational theory suggesting that people are driven to act in a certain way based on the expectation that their actions will lead to a desired outcome.

Motivation

The psychological forces that determine the direction of a person's behavior in an organization, a person's level of effort, and a person's level of persistence.

Work

Exertion or effort directed to produce or accomplish something; can be physical or mental.

Share Options

Financial instruments that give the holder the right, but not the obligation, to buy or sell shares of a stock at a set price within a specific period.