Wk 6 - Practice: Ch 6

If production is characterized by constant returns to scale, then average cost will _____ as output increases.

be constant

The presence of internal scale economies can drive an industry _____ textbook perfect competition because they encourage individual firms to become _____.

away from; larger

In a monopolistically competitive national market with no trade, the long-run equilibrium is set by the intersection of the price and unit cost curves as a consequence of

easy entry and exit.

Consider price competition between two dominant large firms, where each has a choice between setting a low price or setting a high price. The best outcome for the two firms together is usually to set price

high.

With the opening of trade for an industry with external scale economies, a gain in well-being (surplus) results for all except

producers in the importing country.

Suppose a firm has an average cost of $2 when production is 200 units, $1.50 when 400 units are produced, and $1.25 when 600 units are produced. From these observations we can conclude that the production process is exhibiting

scale economies.

Monopolistic competition is a type of market structure in which a _____ number of firms compete vigorously in the selling of _____ products.

large; differentiated

World well-being increased by _______ percent of global GDP when access to products through import increased.

12.5

Select all that apply Which of the following might be a source of internal economies for a firm? The existence of large up-front fixed costs The number and proximity of other producers The possession of product patents The availability of specialized capital that operates at high volume

The existence of large up-front fixed costs The availability of specialized capital that operates at high volume

In order to take advantage of the cost-reducing benefits of substantial scale economies, the production of a product tends to be concentrated in _____ facilities in _____ countries.

a few; a few

Because aggressive competition between oligopolies usually results in each earning little profit, they typically seek ways to

cooperate.

Select all that apply The relocation of a global oligopolist due to changing cost conditions may be thwarted by the prospect of an extended period of losses due to xenophobic attitudes of corporate shareholders. cutthroat acts from established firms. declining prices stemming from greater overall production.

cutthroat acts from established firms. declining prices stemming from greater overall production.

Although comparative advantage accounts for some intra-industry trade, much of it instead is driven by product

differentiation.

If a country has a positive net trade in a product, then it is a net _____ of that product.

exporter

If the average cost of the typical firm producing within a given geographical area declines as the output of the industry increases within that area, ________ scale economies are said to be present. (Give your answer as a single word.)

external

The concentration of filmmakers in Southern California and computer firms in Northern California are examples of the presence of ______ scale economies. (Give your answer using a single word.)

external

The concentration of filmmakers in Southern California and computer firms in Northern California are examples of the presence of _______ scale economies. (Give your answer using a single word.)

external

Compared to the standard trade case (perfect competition, no scale economies). Consumers in an exporting country experiencing external scale economies (in its exporting industry) will

gain.

An explanation for the emergence of oligopoly is the exploitation of substantial _____ scale economies.

internal

When a country both exports and imports the same or very similar products, the trade is referred to as _______ industry trade.

intra

External scale economies are said to exist when the expansion of an entire industry's production within a given geographical area _______ the long-run average cost for each firm in the industry in the area. (Give your answer using a single word.)

lessens, reduces, decreases, lowers, or drops

With the opening of intra-industry trade, extra exports will occur simultaneously as imports take part of the domestic market, resulting in _____ change in the total output of the domestic industry.

little

Consider price competition between two dominant large firms, where each has a choice between setting a low price or setting a high price. Because the two usually compete aggressively, they each end up with _____ profits.

low

As a result of the opening of trade in a differentiated product produced in separate national monopolistically competitive markets, consumers in each country have access to more models at prices _____ those previously found in the separate national markets.

lower than

Compared to high-income industrialized economies, intra-industry trade for low-income developing countries tends to be

lower.

If a country's trade in a product is described as intra-industry, then its exports of the product _____ its imports of the product.

may more or less match

If a global oligopolist's original location loses its comparative advantage (based on factor prices and factor availability), it _____ move to a new location where it could produce more cheaply.

may nevertheless not

An industry characterized by the presence of a number of firms, each producing a variant of some general product, is known as _____ competition.

monopolistic

The presence of relatively modest scale economies combined with the availability of differentiated products yields the market structure known as

monopolistic competition.

Intra-industry trade in manufactured products today tends to be _____ important than it is in agricultural and primary products.

more

The opening of trade in a differentiated product produced in separate national monopolistically competitive markets results in a single market with _____ models available to consumers in each country.

more

A global oligopoly is an industry in which a few firms account for _____ of the world's production of a good.

most

In order to assess the importance of a product in a country's inter-industry trade, we must look at _____ trade in that product.

net

The long-run equilibrium in a monopolistically competitive national market with no trade occurs at the intersection of the _____ curves.

price and unit cost

If the opening (or expansion) of trade is mostly intra-industry, then the impact on the domestic distribution of factor income is

relatively minor.

With the opening of trade in a differentiated product produced in separate national monopolistically competitive markets, a larger single global market is formed with a unit cost curve positioned farther to the _____ than either of the separate national unit cost curves.

right

Data for six industrialized countries shows that the importance of intra-industry trade has been _____ in recent decades.

rising

Compared to product differentiation, the role of comparative advantage in explaining intra-industry trade is relatively

small.

Each firm in a monopolistically competitive industry has _____ monopoly power based on its established production of its unique variety.

some

Individual firms in a monopolistically competitive market have _____ control over price.

some

Compared to monopolistic competition, oligopoly is a much _____ form of imperfect competition.

stronger

With the opening of trade in a differentiated product produced in separate national monopolistically competitive markets, a larger single global market is formed with a price curve _____ the individual pretrade national price curves.

the same as

A major additional source of national gains from trade is the increase in the number of ____________ products available through imports.

variety