Consider the Trade of a Product Between Two Regions

question 1

Multiple Choice

Consider the trade of a product between two regions.If it is very inexpensive to move the product from one regional market to another,then the

• A)price it sells for in every country will depend on the cost of labour in the single low- cost country in which the product was produced.
• B)absolute cost of producing the product must be the same in all markets.
• C)difference in the price from one market to another will depend on the relative elasticities of supply in the separate markets.
• D)"law of one price" argues that it will sell for the same price in all markets.
• E)production of the world supply will be from the single country with the lowest absolute cost of producing it.

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Definitions:

Marginal Cost

The amount needed to generate one more unit of a good or service.

Average Total Cost

The overall expense of manufacturing, when dispersed across the number of products made, encompassing both constant and fluctuating expenses.

Average Variable Cost

The sum of all costs that fluctuate with production volume, divided by the total amount of goods produced.

Long Run

A period in which all factors of production and costs are variable, allowing for full adjustment to changes.