If a Small Country Is Protecting Its Industry That Might

question 33

Multiple Choice

If a small country is protecting its industry that might mean that:

• A) tariffs are necessary because otherwise wages in the small country will be very low.
• B) tariffs are necessary to protect employment in the small country.
• C) workers in other countries are more productive than workers in the small country.
• D) it is too small to be able to achieve economies of scale in this industry.

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Definitions:

Long-run Equilibrium

Long-run equilibrium occurs when all producers in a market are producing at their minimum long-run average cost, and no new firms wish to enter or exit the market.

Average Cost

The total cost of production divided by the number of goods produced, also known as unit cost.

Marginal Cost

The increase in total cost that arises from an extra unit of production.

Elasticity

A measure of how much the quantity demanded or supplied of a good responds to a change in price or other factors.