Module 4: Global Value Chains & The Firms Flashcards
(17 cards)
A monopolistic firm
A) can sell as much as it wants for any price it determines in the market.
B) cannot sell additional quantity unless it raises the price on each unit.
C) chooses an output at which marginal revenue equals marginal cost.
D) cannot determine the price, which is determined by consumer demand.
E) will always earn a profit in the long run.
Answer: C
Monopolistic competition is associated with
A) product differentiation.
B) price-taking behavior.
C) increasing returns to scale.
D) high profit margins in the long run.
E) explicit consideration at the firm level of the strategic impact of other firms’ pricing
decisions.
Answer: A
When a country both exports and imports a type of commodity, the country is
engaged in
A) inter-industry trade.
B) an attempt to monopolize the relevant industry.
C) increasing returns to scale.
D) intra-industry trade.
E) imperfect competition.
Answer: D
If there are a large number of firms in a monopolistically competitive industry
A) the country in which the firms are located can be expected to export the goods they
produce.
B) long-run profit will be equal to zero.
C) there will be a small number of firms that are very large and the rest will be very
small.
D) the firms will converge production on a standardized product.
E) there will be barriers to entry that prevent additional firms from entering the industry.
Answer: B
If a firm increases its output in the ________ and unit costs ________, then the
firm is experiencing ________ of scale.
A) long run; decrease; economies
B) long run; increase; economies
C) short run; decrease; diseconomies
D) long run; decrease; diseconomies
E) short run; decrease; economies
Answer: A
An imperfectly competitive firm has the following demand curve: Q = 100 - 2P.
What is marginal revenue equal to when P = 30?
Answer: Q = 40, so MR = 30 - (40/2) = 10.
An imperfectly competitive firm has the following total cost curve: C = 100 + 4Q.
What is marginal cost equal to when Q = 10?
Answer: MC = 4 for any Q
The simultaneous export and import of widgets by the United States is an
example of
A) inter-industry trade.
B) imperfect competition.
C) the effect of a monopoly on international trade.
D) intra-industry trade.
E) increasing returns to scale.
Answer: D
International trade based solely on internal scale economies in both countries is
likely to be carried out by
A) a relatively small number of imperfect competitors.
B) a large number of oligopolists in each country.
C) monopolists in each country.
D) a relatively small number of price competing firms.
E) a relatively large number of price competing firms.
Answer: C
Two countries engaged in trade in products with scale economies, produced
under conditions of monopolistic competition, are likely to be engaged in
A) immiserizing trade.
B) inter-industry trade.
C) intra-industry trade.
D) Heckscher-Ohlinean trade.
E) price competition.
Answer: C
In an industry where firms experience internal scale economies, the long-run
cost of production will depend on
A) individual firms’ fixed costs.
B) the size of the labor force.
C) whether the country engages in intra-industry trade.
D) the size of the market.
E) whether the country engages in inter-industry trade.
Answer: D
The most common form of price discrimination in international trade is
A) preferential trade arrangements.
B) non-tariff barriers.
C) product boycotts.
D) Voluntary Export Restraints.
E) dumping.
Answer: E
When a multinational affiliate replicates production in a foreign country it is
called ________ foreign direct investment.
A) bisectional
B) direct
C) horizontal
D) transitional
E) vertical
Answer: C
When a multinational affiliate replicates elements of a production process in a
foreign country it is called ________ foreign direct investment.
A) horizontal
B) vertical
C) transitional
D) bisectional
E) direct
Answer: B
A firm is more likely to engage in horizontal foreign direct investment if
A) trade costs are low and firms experience constant returns to scale in production.
B) trade costs are low and there are internal economies of scale.
C) trade costs are high and there are internal economies of scale.
D) trade costs are high and there are external economies of scale.
E) trade costs are low and there are external economies of scale.
Answer: C
Foreign outsourcing is
A) the transfer of operations to foreign contractors.
B) an example of foreign direct investment.
C) an example of internalization.
D) currently illegal in the U.S.
E) the substitution of immigration for foreign direct investment.
Answer: A
What are the consequences of outsourcing production on the welfare of countries?
Answer: By taking advantage of cost differentials between countries, both countries can
enjoy gains from trade. However, income distribution effects will result in winners and
losers. Gains from trade are therefore thought of in terms of net gains in which the
winners could compensate the losers and still be better off.
