If Two Countries Begin Trade and Both Produce a Product

question 3

Multiple Choice

If two countries begin trade and both produce a product subject to internal economies of scale, then the country with the ________ rate of production will ________ production until it controls ________ of the market.

• A) higher; increase; 50%
• B) higher; increase; 100%
• C) higher; decrease; 0%
• D) lower; increase; 50%
• E) lower; increase; 100%

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Definitions:

Merchandise

Goods or products that are bought and sold by businesses in the course of their trade or business operations.

Sales Returns and Allowances

Transactions in which customers return damaged or unsatisfactory products for refunds or credit, and adjustments made to sales revenue for these returns or granted concessions.

Accounts Receivable

Outstanding payments from customers to a firm for delivered or utilized goods or services awaiting settlement.

Merchandise Return

The process whereby customers return previously purchased merchandise to the seller for a refund, store credit, or exchange.