Question

If each country specializes in producing those goods in which it has a comparative advantage, then

Select one:

a. each country will be self-sufficient

b. world output will be maximized

c. the consumption possibilities for the world will be reduced

d. all countries will have the same standard of living.

e. rich countries will get richer and poor countries will get poorer

Evidence indicates that tariffs and quotas are

Select one:

a. beneficial for producers in a protected industry, but not beneficial for consumers.

b. not beneficial for the workers in a protected industry or for consumers.

c. beneficial for producers in a protected industry, but not beneficial for the workers in the industry.

d. b and c

e. beneficial for workers in a protected industry, but not beneficial for consumers.

Electric utilities achieved monopoly because of

Select one:

a. control of essential resources

b. economies of scale

c. control over key patents

d. very low fixed costs

For a market to be a true monopoly, it must have

Select one:

a. a single seller, no close substitutes for the product, and patents

b. a few interdependent sellers, homogenous products, and entry barriers

c. a few interdependent sellers, differentiated products, and entry barriers

d. a single seller, no close substitutes for the product, and entry barriers

e. many small sellers, homogenous products, and no entry barriers

If there are significant barriers to entry, then a firm may do what over the long-run?

Select one:

a. charge whatever price they want without fear of it reducing output

b. ignore demand

c. earn economic profits

(NO EXPLANATIONS NEEDED FOR ANSWERS!)

Answer 1

1. b. world output will be maximized

Explanation: When a country has a comparative advantage in a good, it means the country can produce the good at a lower opportunity cost. Therefore, when each country produces according to its comparative advantage, the world output becomes maximum.

2. a. beneficial for producers in a protected industry, but not beneficial for consumers.

Explanation: Tariffs and quota protect the domestic producers of the protected industry but this harm the domestic consumers as the price goes up and they can consume less.