If the World Price of Sugar Is Lower Than Brazil's

question 54

Multiple Choice

If the world price of sugar is lower than Brazil's domestic price of sugar without trade,then Brazil

• A) should import sugar.
• B) has a comparative advantage in sugar.
• C) should produce just enough sugar to satisfy domestic demand.
• D) should produce no sugar domestically.

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Definitions:

Natural Monopoly

An industry in which economies of scale are so great that a single firm can produce the industry’s product at a lower average total cost than would be possible if more than one firm produced the product.

Unit Costs

The expense a business incurs to manufacture, warehouse, and distribute a single unit of a specific product or service.

Entire Output

The total amount of goods or services produced by a company, industry, or country within a specific period.

Economies of Scale

Cost advantages reaped by companies when production becomes efficient, leading to a decrease in cost per unit as output increases.