In a World of Perfect Knowledge and Communication, Competitive Markets

question 8

Multiple Choice

In a world of perfect knowledge and communication, competitive markets, and no uncertainty,

• A) there would be neither economic profits nor economic losses.
• B) economic profits would exist, but losses would be eliminated.
• C) economic profits and losses would exist to a greater degree than presently is the case.
• D) there would be economic profits; there is not enough information to comment on economic losses.

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Definitions:

Tariff

A tax imposed on imported goods, intended to increase the price of foreign products to protect domestic producers.

Quota

A government-imposed trade restriction that limits the number or monetary value of goods that can be imported or exported during a specific time frame.

Comparative Advantage

The capacity of a nation or company to manufacture a specific good or service with a lower opportunity cost compared to its rivals.

Absolute Advantage

The ability of an individual, company, or country to produce a good or service more efficiently than competitors with the same resources.