If US Prices Increase Relative to the Rest of the World

question 118

Multiple Choice

If U.S. prices increase relative to the rest of the world, we would expect imports:

• A) to increase and exports to fall.
• B) to decrease and exports to increase.
• C) as well as exports to increase.
• D) as well as exports to decrease.

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Definitions:

Long-run Average Total Cost

The long-run average total cost is the per-unit cost of production when all inputs can be adjusted, reflecting the most cost-efficient scale of operation.

Long-run Total Costs

The total costs incurred by a firm when all inputs are variable and can be adjusted.

Economies of Scale

Cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output.

Long-run Average Total Cost

The average cost per unit of output when all inputs, including capital, are variable, analyzed over a period when all factors of production can be adjusted.