If Two Countries Begin Trade and Both Produce a Product

question 3

Multiple Choice

If two countries begin trade and both produce a product subject to internal economies of scale, then the country with the ________ rate of production will ________ production until it controls ________ of the market.

• A) higher; increase; 50%
• B) higher; increase; 100%
• C) higher; decrease; 0%
• D) lower; increase; 50%
• E) lower; increase; 100%

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Definitions:

Marginal Revenue

The increased earnings a business obtains from the sale of one extra item or service.

Marginal Cost

The increase in total cost that arises from producing one additional unit of a product.

Output

The quantity of goods or services produced in a given time period by a firm, industry, or country.

Economic Profit

The divergence between aggregate income and total outlays, inclusive of both tangible and intangible expenses.