Suppose the World Economy Is Composed of Just Two Countries

question 332

Multiple Choice

Suppose the world economy is composed of just two countries: Italy and Greece. Each can produce steel or chemicals, but at different levels of economic efficiency. The production possibilities curves for the two countries are shown in the graphs. If Italy and Greece open up trade with each other, which of the following terms of trade is mutually beneficial?

• A)1 ton of chemicals = 1 ton of steel
• B)2 tons of chemicals = 1 ton of steel
• C)5 tons of chemicals = 2 tons of steel
• D)9 tons of chemicals = 5 tons of steel

Understand the characteristics of a natural monopoly.

Comprehend the regulatory challenges and approaches for natural monopolies.

Recognize the impact of global competition on antitrust policies and market competitiveness.

Analyze the consequences of breaking up monopolies into smaller firms in the presence of economies of scale.

---

Definitions:

Product Liability Action

Legal action taken against manufacturers, distributors, suppliers, or retailers for damages caused by defective products they sold or distributed.

Damaged After Purchase

Refers to goods or items that become defective or damaged after they have been bought by a consumer.

Strict Product Liability

A doctrine in tort law that makes manufacturers, distributors, or sellers liable for any defects in the products they market, irrespective of negligence.

Manufacturer

An individual or company that makes goods for sale using raw materials and parts, typically in a large-scale operation involving machinery.