If a Country Produces a Commodity in the Range of Decreasing

question 22

Multiple Choice

If a country produces a commodity in the range of decreasing returns to scale, and the country begins to export more in a pure free trade system, the domestic price of the commodity will

• A)fall.
• B)rise.
• C)exceed the price in foreign countries.
• D)be below the price in foreign countries.
• E)One cannot predict the impact on the price of the commodity.

---

Definitions:

Francs

A currency formerly used in France and some other countries, and still used in some parts of Switzerland and the Pacific.

Consumption

(rephrased) involves the utilization of goods and services by individuals or communities, primarily for personal satisfaction and basic needs.

WARP

WARP, or the Weak Axiom of Revealed Preference, is a consistency criterion for consumer choice behavior, suggesting that if a consumer prefers bundle A over bundle B when both are affordable, they should not choose B when A is still affordable.

Bundle

A collection of items or services grouped together as a single package.