A Product Is Produced in a Monopolistically Competitive Industry with Scale

question 56

Multiple Choice

A product is produced in a monopolistically competitive industry with scale economies. If this industry exists in two countries, and these two countries engage in trade with each other, then we would expect

• A) the country with a relative abundance of the factor of production in which production of the product is intensive will export this product.
• B) the countries will trade only with other nations they are not in competition with.
• C) the country in which the price of the product is lower will export the product.
• D) neither country will export this product since there is no comparative advantage.
• E) each country will export different varieties of the product to the other.

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Definitions:

Revenue

The total amount of money received by a company for goods sold or services provided during a specific time period.

Percentage-Of-Completion

An accounting method that recognizes revenues and gross profit on long-term contracts in proportion to the work completed to date.

Gross Profit

The difference between sales revenue and the cost of goods sold, representing the basic profitability of the sales of goods and services.

Construction Costs

Expenses incurred during the process of building structures, infrastructure, or other significant physical assets, including materials, labor, and overhead.