B8 Flashcards
Firms in the global economy, export decisions, outsourcing and multinational enterprises (37 cards)
in a perfectly competative market firms are price takers
true, their production choices do not effect the price of goods
How does imperfect competition apear
When there are only a few companies in the industry or when a company produces goods that are differentiated in the eyes of the consumer
internal economies of scale leads to imperfect competition and companies that view themselves as price setters
true, they will outcompete eachother or force diferentiation
How much does a monopoly produce
Untill marginal cost equals marginal revenue
Is the marginal revenue curve always bellow the demand curve
Yes becouse to sell an iditional unit it has to lower the price of all the goods thus marginal revenue decreases faster in proportion to the demand at the price
will other firms be effected by one firms price setting in monopolistc competition
Not in a way that would make them change their own prices in response such as in oligopolies
How does the number of firms in monopolistic competition affect price
Price decreases as competition intensifies
How are costs effected by competition in monopolistic competition
More competition often leads to higher costs if we assume the companies are symmetrical as companies prodice less and are not able to take advantage of scale
What is the equalibrium price in monopolistic competition
When price equals average cost as greater would attract more competition driving up costs and lesser would mean losses that forces some to leave
How does opening up to trade effect monopolistic competition
It serves as an enlarging of the market that allows each firm all things equal the produce more and gain lower cost which then entices more competition which reduces the prices. Lower costs but lower prices better for consumers anyway
What is intra industry trade
When two countries trade similar goods in an industry where there is monopolistic competition, the countries gain from trade as it leads to a bigger market, allowing them to cut costs but as it is monopolistic competition one country cannot take over the whole industry.
Is there emperical evidence of intra industry trade
Yes, just look at the car market, consumers can enjoy the greater variety of cars and lower prices that comes from economies of scale
How does opening up to trade affect productivity in the domestic industry
Weaker companies die as they cannot keep up with the competition while stronger companies expand in the larger market increasing productivity in the industry as a whole
The symmetry assumption means that the companies in tue monopolistic competition trade model have the same cost curve and the same demand curve
True
Most markets are perfectly integrated
No, there are often costs associated with trade
Do bigger or smaller companies usually export
Bigger companies with their lower marginal costs are the ones that tend to export as the trade barriers are to high for small companies to export at a profit
What is dumping
When a firm lowers its markup and so price on export markets compared to domestic markets, a practice considered to be unfair competition
Can a company seek damages when a forign competitor is dimping
Yes, it usually comes in the form of an anti dumping duty scaled as the price diference if the markup
Is there economical reasons to enforce anyi dumping laws
No, it is basically just rebranded protectionism
How much of a domestic firm needs to be controlled by a foreign company to be considered multinational
10%
What is greenfield fdi
When a domestic firm builds a facility abroad
What are brownfield fdi
When a domestic firm buys 10% aka a controlling share of a foreign firm
What is vertical fdi
When parts in the supply chain are produced abroad by a domestic company
What is horizontal fdi
When additional facilities that does the same commercial activities as the ones home are created abroad by a domestic firm
