What Is the Expected Outcome When Trade Occurs in a

question 24

Multiple Choice

What is the expected outcome when trade occurs in a
Monopolistically competitive industry if the nations have similar
Tastes, technology, products, and costs?

• A)No trade is possible.
• B)Consumers are left with no choices.
• C)Each firm has a larger market in which to sell, and consumers have more choices of sellers and products.
• D)Transportation costs become the driving factor.

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Definitions:

Opportunity Cost

The cost of forgoing the next best alternative when a decision is made to choose one option over another.

Production Possibilities Curve

A graphical representation showing the maximum quantity of goods and services that a society can produce with existing resources and technology, underlining the concept of opportunity cost.

Consumer Goods

Goods produced for direct consumption by the end customer, as opposed to goods used in the production of other goods.

Capital Goods

Physical assets that are used in the production of other goods and services and have a life expectancy of more than one year.