The Table Below Shows the Quantity Demanded (In Thousands) and Quantity

question 70

Multiple Choice

The table below shows the quantity demanded (in thousands) and quantity supplied (in thousands) of computers in the U.S. and Canada at different prices.Table 20.5

-Suppose the production of helicopters is an industry characterized by increasing returns to scale and an Argentine firm, Cicare, is the only player in this market. The firm caters to the global market and earns a profit of $10 million. Flettner, a German firm has been considering entering this market for a while, but it is aware that its entry will cause each firm to lose about $4 million. Although a government subsidy allows Flettner to enter the helicopter market, the company is unable to reap profits in the long run. Which of the following could have led to this outcome?

• A)Flettner experienced high production costs due to inadequate supply of inputs.
• B)New firms entered the helicopter industry.
• C)The German government ran a balance of payment deficit.
• D)The Argentine government retaliated by subsidizing Cicare.
• E)There was very low investment in research and development in this industry.

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Definitions:

Radical Innovation

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