ECN 420 Chapter 7 and 8

3) International trade based on external scale economies in both countries is likely to be carried out by A) a relatively large number of price competing firms. B) a relatively small number of price competing firms. C) a relatively small number of imperfect competitors. D) monopolists in each country. E) a large number of oligopolists in each country.

A) a relatively large number of price competing firms

13) We often observe "pseudo-intra-industry trade" between the United States and Mexico. Actually, such trade is consistent with A) comparative advantage associated with Heckscher-Ohlin model. B) oligopolistic markets. C) optimal tariff issues. D) the Ricardian model of trade. E) the specific factors model of trade.

A) comparative advantage associated with Heckscher-Ohlin model.

1) In the model of monopolistic competition, trade costs between countries will cause domestic and foreign markets to have ________ prices, ________ quantities sold, and ________ profit levels. A) different; different; different B) identical; different; different C) different; different; identical D) identical; different; identical E) identical; identical; different

A) different; different; different

2) In the model of monopolistic competition, if firms have ________ average cost curves, then opening trade will cause ________ firms to ________ the industry. A) different; less efficient; exit B) different; more efficient; enter C) symmetric; less efficient; exit D) symmetric; more efficient; enter E) symmetric; less efficient; enter

A) different; less efficient; exit

5) A monopoly firm engaged in international trade will A) equate marginal costs with marginal revenues in both domestic and foreign markets. B) equate average to local costs. C) equate marginal costs with foreign marginal revenues. D) equate marginal costs with the highest price the market will bear. E) equate marginal costs with the relative world prices.

A) equate marginal costs with marginal revenues in both domestic and foreign markets

5) In the model of monopolistic competition, an increase in industry output will cause individual firms' demand curves to become ________, which will ________ demand for higher-priced goods and ________ demand for lower-priced goods. A) flatter; reduce; increase B) steeper; reduce; increase C) flatter; increase; reduce D) steeper; increase; reduce E) horizontal; reduce; reduce

A) flatter; reduce; increase

6) In the model of monopolistic competition, an increase in industry output will ________ producers of ________ higher-priced goods and ________ producers of lower-priced goods. A) harm; benefit B) benefit; harm C) harm; harm D) benefit; benefit E) benefit; have no effect on

A) harm; benefit

4) In the model of monopolistic competition, compared to a firm with a lower marginal cost, a firm with a higher marginal cost will set a ________ price, produce ________ output, and earn ________ profits. A) higher; less; less B) lower; more; more C) higher; more; more D) lower; less; less E) higher; less; more

A) higher; less; less

11) Two countries engaged in trade in products with no scale economies, produced under conditions of perfect competition, are likely to be engaged in A) inter-industry trade. B) monopolistic competition. C) intra-industry trade. D) Heckscher-Ohlin trade. E) oligopolistic competition

A) inter-industry trade

19) Under oligopoly, firms' pricing policies are ________ and, under monopolistic competition, they are ________. A) interdependent; independent B) independent; interdependent C) cooperative; uncooperative D) uncooperative; cooperative E) profit maximizing; revenue maximizing

A) interdependent; independent

12) Two countries engaged in trade in products with scale economies, produced under conditions of monopolistic competition, are likely to be engaged in A) intra-industry trade. B) price competition. C) inter-industry trade. D) Heckscher-Ohlinean trade. E) immiserizing trade.

A) intra-industry trade.

2) If the market for products produced by firms in a monopolistically competitive industry becomes ________, then there will be ________ firms and each firm will produce ________ output and charge a ________ price. A) larger; more; more; lower B) larger; fewer; more; lower C) larger; fewer; more; higher D) larger; more; more; higher E) larger; more; less; higher

A) larger; more; more; lower

9) If a firm increases its output in the ________ and unit costs ________, then the firm is experiencing ________ of scale. A) long-run; increase; diseconomies B) short-run; decrease; economies C) long-run; decrease; diseconomies D) short-run; decrease; diseconomies E) long-run; increase; economies

A) long-run; increase; diseconomies

3) In the model of monopolistic competition, compared to a firm with a higher marginal cost, a firm with a lower marginal cost will set a ________ price, produce ________ output, and earn ________ profits. A) lower; more; more B) higher; more; more C) lower; less; less D) higher; less; less E) higher; less; more

A) lower; more; more

10) If a firm that uses a production process that yields economies of scale charges a price equal to ________, then profit will be ________. A) marginal cost; negative B) marginal revenue; maximized C) marginal cost; maximized D) marginal revenue; positive E) marginal cost; positive

A) marginal cost; negative

6) A monopoly firm will maximize profits by producing where A) marginal revenue is the same in domestic and foreign markets. B) prices are the same in domestic and foreign markets. C) marginal revenue is higher in foreign markets. D) marginal revenue is higher in the domestic market. E) total revenue from domestic and foreign sales is maximized.

A) marginal revenue is the same in domestic and foreign markets.

2) Monopolistic competition is associated with A) product differentiation. B) price-taking behavior. C) explicit consideration at the firm level of the strategic impact of other firms' pricing decisions. D) high profit margins in the long run. E) increasing returns to scale.

A) product differentiation.

7) In the model of monopolistic competition, an increase in industry output will ________ market shares and ________ profits of producers of higher-priced goods and will ________ market shares and ________ profits of producers of lower-priced goods. A) reduce; reduce; increase; increase B) increase; increase; reduce; reduce C) increase; reduce; increase; reduce D) reduce; increase; reduce; increase E) reduce; increase; increase; reduce

A) reduce; reduce; increase; increase

12) Imperfectly competitive firms have a demand curve that ________ and a marginal revenue curve that ________ and is ________ the demand curve. A) slopes downward; slopes downward; below B) is horizontal; is horizontal; the same as C) slopes downward; is horizontal; above D) is horizontal; slopes downward; below E) slopes downward; slopes downward; the same as

A) slopes downward; slopes downward; below

21) In an industry where firms experience internal scale economies, the long-run cost of production will depend on A) the size of the market. B) the size of the labor force. C) whether the country engages in intra-industry trade. D) individual firms' fixed costs. E) whether the country engages in inter-industry trade.

A) the size of the market.

3) Modeling trade in imperfectly competitive industries is problematic because A) there is no single generally accepted model of behavior by imperfectly competitive firms. B) there are no models of imperfectly competitive behavior. C) it is difficult to find an imperfectly competitive firm in the real world. D) collusion among imperfectly competitive firms makes usable data rare. E) there is only a single model of imperfect competition (monopoly) but imperfect competition can take many forms in the real world.

A) there is no single generally accepted model of behavior by imperfectly competitive firms

14) An imperfectly competitive firm has the following demand curve: Q = 100 - 2P. What is marginal revenue equal to when P = 40?

Answer: Q = 20, so MR = 40 - (20/2) = 30.

13) 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.

1) If a firm's output more than doubles when all inputs are doubled, production is said to occur under conditions of A) increasing returns to scale. B) imperfect competition. C) intra-industry equilibrium. D) constant returns to scale E) decreasing returns to scale.

Answer: A Page Ref: 146-147

2) One advantage of the specialization that results from international trade is that countries can take advantage of A) scale economies. B) production diversification C) smaller countries. D) taste reversals. E) lower transport costs.

Answer: A Page Ref: 146-147

1) The existence of external economies of scale A) may be associated with a perfectly competitive industry. B) cannot be associated with a perfectly competitive industry. C) tends to result in one huge monopoly. D) tends to result in large profits for each firm. E) focuses more on individual firms than the industry as a whole.

Answer: A Page Ref: 147-148

12) External economies of scale will ________ average cost when output is ________ by ________. A) reduce; increased; the industry B) reduce; increased; a firm C) increase; increased; a firm D) increase; increased; the industry E) reduce; reduce; the industry

Answer: A Page Ref: 147-148

2) The existence of internal economies of scale A) cannot be associated with a perfectly competitive industry. B) may be associated with a perfectly competitive industry. C) is associated only with sophisticated products such as aircraft. D) cannot form the basis for international trade. E) focuses more on the industry than individual firms.

Answer: A Page Ref: 147-148

3) When there are external economies of scale, an increase in the size of the market will A) increase the number of firms and lower the price per unit. B) increase the number of firms and raise the price per unit. C) decrease the number of firms and raise the price per unit. D) decrease the number of firms and lower the price per unit. E) not affect the number of firms, but will lower the price per unit.

Answer: A Page Ref: 147-148

4) If some industries exhibit internal increasing returns to scale in each country, we should not expect to see A) perfect competition in these industries. B) intra-industry trade between countries. C) inter-industry trade between countries. D) high levels of specialization in both countries. E) increased productivity in both countries.

Answer: A Page Ref: 147-148

6) External economies of scale arise when the cost per unit A) falls as the industry grows larger and rises as the average firm grows larger. B) rises as the industry grows larger and falls as the average firm grows larger. C) falls as the industry and the average firm grows larger. D) remains constant over a broad range of output. E) rises as the industry and the average firm grows larger.

Answer: A Page Ref: 147-148

7) Internal economies of scale arise when the cost per unit A) falls as the average firm grows larger. B) rises as the industry grows larger. C) falls as the industry grows larger. D) rises as the average firm grows larger. E) remains constant over a broad range of output.

Answer: A Page Ref: 147-148

8) Where there are internal economies of scale, the scale of production possible in a country is constrained by A) the size of the domestic plus the foreign market. B) the size of the country. C) the size of the trading partner's country. D) the size of the domestic market. E) the size of the foreign market.

Answer: A Page Ref: 147-148

9) Internal economies of scale will ________ average cost when output is ________ by ________. A) reduce; increased; a firm B) increase; increased; a firm C) reduce; increased; the industry D) increase; increased; the industry E) reduce; reduce; the industry

Answer: A Page Ref: 147-148

2) External economies of scale often arise because similar firms A) locate in the same geographic region. B) collude to fix prices and increase profits. C) have excellent internal logistics. D) agree to cooperate to expand global trade. E) have economies of scale in production.

Answer: A Page Ref: 148-151

3) The Internet has made transactions between businesses (B2B trading) fast and easy. Any business in any location can access specialized knowledge, labor, and materials. It is likely that these virtual economic communities will result in A) external economies of scale. B) internal economies of scale. C) consolidation of industries into a small number of powerful firms. D) suppression of innovations and collusive behavior, driving up prices. E) government intervention and regulation.

Answer: A Page Ref: 148-151

4) The long-run market supply curve in the presence of internal economies of scale is ________, and in the presence of external economies of scale, it is ________. A) downward sloping; downward sloping B) upward sloping; horizontal C) horizontal; upward sloping D) downward sloping; horizontal E) upward sloping; downward sloping

Answer: A Page Ref: 148-151

5) If output is increased in the long-run, average production costs in the presence of internal economies of scale will ________, and in the presence of external economies of scale, will ________. A) decrease; decrease B) increase; remain constant C) remain constant; increase D) decrease; remain constant E) increase; decrease

Answer: A Page Ref: 148-151

1) If two countries begin trade and both produce a product subject to external economies of scale, then the country with the ________ rate of production will ________ production until it controls ________ of the market. A) higher; increase; 100% B) higher; increase; 50% C) lower; increase; 100% D) lower; increase; 50% E) higher; decrease; 0%

Answer: A Page Ref: 152-158

3) In the presence of external economies of scale, trade A) may or may not improve welfare in both countries. B) will unambiguously improves welfare in both countries. C) will unambiguously worsens welfare in both countries. D) will unambiguously worsen welfare in the exporting country and improve welfare in the importing country. E) will unambiguously improve welfare in the exporting country and worsen welfare in the importing country.

Answer: A Page Ref: 152-158

4) A learning curve relates ________ to ________ and is a case of ________ returns. A) unit cost; cumulative production; dynamic increasing returns B) output per time period; long-run marginal cost; dynamic increasing returns C) unit cost; cumulative production; dynamic decreasing returns D) output per time period; long-run marginal cost; dynamic decreasing returns E) labor productivity; education; increasing marginal returns

Answer: A Page Ref: 152-158

5) The learning curve describes the ________ relationship between ________ and ________. A) inverse; unit cost; cumulative output B) direct; unit cost; cumulative output C) inverse; education; annual income D) direct; education; annual income E) direct; education; labor productivity

Answer: A Page Ref: 152-158

6) If two countries begin trade and both produce a product subject to internal economies of scale, then the country with the ________ rate of production will ________ production until it controls ________ of the market. A) higher; increase; 100% B) higher; increase; 50% C) lower; increase; 100% D) lower; increase; 50% E) higher; decrease; 0%

Answer: A Page Ref: 152-158

1) Restaurant meals are an example of a ________ good and clothing is an example of a ________ good. The pattern of interregional trade is determined primarily by ________. A) nontraded; traded; external economies. B) traded; nontraded; internal economies C) nondurable; durable; natural resource D) durable; nondurable; natural resources E) consumer; style; population

Answer: A Page Ref: 158-161

2) The share of ________ goods in employment is ________ across the country. The share of ________ goods in employment is ________ across the country. A) nontraded; uniform; traded; variable B) traded; uniform; nontraded; variable C) durable; uniform; nondurable; variable D) nondurable; uniform; durable; variable E) nontraded; variable; traded; uniform

Answer: A Page Ref: 158-161

3) Patterns of interregional trade are primarily determined by ________ rather than ________ because factors of production are generally ________. A) external economies; natural resources; mobile B) internal economies; external economies; mobile C) external economies; population; immobile D) internal economies; population; immobile E) population; external economies; immobile

Answer: A Page Ref: 158-161

4) The primary determinant of patterns of interregional trade is A) accidents of history. B) resource allocations. C) factor abundance. D) weather. E) centralized optimization.

Answer: A Page Ref: 158-161

1) What is meant by an "industrial district" and what are the three main sources of the economic advantages derived from locating in such a district?

Answer: An industrial community is a geographical concentration of firms in the same industry. Silicon Valley and Bollywood are modern examples. The advantages are (1) specialized suppliers, (2) labor market pooling, and (3) knowledge spillovers. Page Ref: 148-151

5) The study of factors that influence both international and interregional trade is referred to as A) accidents of history. B) economic geography. C) factor abundance theory. D) weather analysis. E) centralized optimization.

Answer: B Page Ref: 158-161

10) Why is it that if an industry is operating under conditions of internal scale economies then the resultant equilibrium cannot be consistent with the pure competition model?

Answer: Because once one firm will becomes bigger than another, or if one firm began the industry, then no other firm will be able to match its per unit cost, so that they would be driven out of the industry. The firm would become a natural monopoly. Page Ref: 147-148

6) If the firms in a market have constant returns to scale internally while there are external economies of scale for the industry, a firm's long-run supply curve will be ________ and the long-run market supply curve will be ________. A) downward sloping; downward sloping B) upward sloping; horizontal C) horizontal; downward sloping D) downward sloping; horizontal E) upward sloping; downward sloping

Answer: C Page Ref: 148-151

7) If output is increased in the long-run, then in the presence of internal economies of scale the number of firms will ________, and in the presence of constant external returns to scale the number of firms will ________. A) decrease; decrease B) increase; remain constant C) remain constant; increase D) decrease; remain constant E) increase; decrease

Answer: C Page Ref: 148-151

8) If output is increased in the long-run, average production costs in the presence of internal diseconomies of scale will ________, and in the presence of external diseconomies of scale, will ________. A) decrease; decrease B) increase; remain constant C) remain constant; increase D) decrease; remain constant E) increase; decrease

Answer: C Page Ref: 148-151

16) An imperfectly competitive firm has the following total cost curve: C = 100 + 4Q. What is total cost equal to when Q = 10?

Answer: C = 100 + (4)(10) = 140

17) An imperfectly competitive firm has the following total cost curve: C = 100 + 4Q. What is average total cost equal to when Q = 10?

Answer: C/Q = [100 + (4)(10)]/10 = 14

4) If a firm's output doubles when all inputs are doubled, production is said to occur under conditions of A) increasing returns to scale. B) imperfect competition. C) intra-industry equilibrium. D) constant returns to scale E) decreasing returns to scale.

Answer: D Page Ref: 146-147

5) If a firm's output less than doubles when all inputs are doubled, production is said to occur under conditions of A) increasing returns to scale. B) imperfect competition. C) intra-industry equilibrium. D) constant returns to scale E) decreasing returns to scale.

Answer: E Page Ref: 146-147

18) An imperfectly competitive firm has the following total cost curve: C = 100 + 4Q. What is average fixed cost equal to when Q = 10?

Answer: F/Q = 100/10 = 10

2) Explain why positive economies of scale in one (of two) sectors may establish a comparative advantage for the large (as compared to the small) country in the production of the commodity which exhibits positive scale economies.

Answer: In the case of the H-O model, the actual size of the country is irrelevant in the determination of the direction of trade (though it may affect the equilibrium terms of trade). When positive scale economies apply to the production of one product, the country that can devote more resources (in absolute terms) will be able to sell that product cheaper, and therefore will be more likely to gain a "revealed" comparative advantage in that product. This will be the country with more factors (both labor and capital)-the larger country. Page Ref: 152-158

7) Suppose that two countries, A and B, employ the same technology in the production of a good. External economies of scale apply in both countries. Analyze the effects of trade on long-run production levels if country A has a comparatively lower cost of production when trade begins.

Answer: Initially, country B will have a comparative advantage in production of the good. Over time, as production shifts to Country B, costs will decline there while increasing in country A. In the absence of market intervention, country B will have a monopoly. Note that no individual firm will have a monopoly unless internal economies of scale also apply. Page Ref: 152-158

15) 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

3) Why are increasing returns to scale and fixed costs important in models of international trade and imperfect competition?

Answer: There are many answers. Three of these are (a) Increasing returns to scale and high fixed costs may be inconsistent with perfect competition. In such a case, the initial autarkic state may be a suboptimal equilibrium. For example, relative prices may not equal marginal rates of transformation. It follows from this that a change in output compositions associated with trade may result in a national welfare for one or both trading countries that is inferior to that associated with the initial autarkic conditions. Hence no "gains from trade." (b) In a case of increasing scale economies at the firm or plant level, the determination of which product will be exported by which country is ex-ante indeterminate. Therefore, deriving clear implications concerning the effects of trade on income distributions such as may be derived from the Samuelson-Stolper Theorem is no longer generally possible. (c) Market structures containing positive scale economies and imperfect competition may allow for "two-way trade," or intra-industry trade. As in b. above, the various theorems derivable from the Heckscher-Ohlin model concerning directions of trade and income distributions are no longer generally applicable. Page Ref: 146-147

5) If a scale economy is the dominant technological factor defining or establishing comparative advantage, then the underlying facts explaining why a particular country dominates world markets in some product may be pure chance, or historical accident. Explain, and compare this with the answer you would give for the Heckscher-Ohlin model of comparative advantage.

Answer: This statement is true, since the reason the seller is a monopolist may be that it happened to have been the first to produce this product in this country. It may have no connection to any supply or demand related factors; nor to any natural or man-made availability. This is all exactly the opposite of the Heckscher-Ohlin Neo-Classical model's explanation of the determinants of comparative advantage. Page Ref: 147-148

11) Is it possible for an equilibrium that is consistent with purely competitive conditions to arise in an industry with positive scale economies? If so, explain how this could happen. If not, why not?

Answer: Yes. If the scale economies were external to the firm, then there is no reason why the firms may not be in perfect competition. Page Ref: 147-148

11) Firms that produce ________ products must be ________ competitive. A) differentiated; perfectly B) differentiated; imperfectly C) standardized; imperfectly D) standardized; perfectly E) exported; imperfectly

B) differentiated; imperfectly

15) Trade without serious income distribution effects is most likely to happen A) in simple manufactures trade between developing countries. B) in sophisticated manufactures trade between rich countries. C) in sophisticated manufactures trade between rich and poor countries. D) in agricultural trade between rich countries. E) in labor-intensive industries like clothing.

B) in sophisticated manufactures trade between rich countries

5) When a country both exports and imports a type of commodity, the country is engaged in A) increasing returns to scale. B) intra-industry trade. C) imperfect competition. D) inter-industry trade. E) an attempt to monopolize the relevant industry.

B) intra-industry trade

9) An industry is characterized by scale economies and exists in two countries. In order for consumers of its products to enjoy both lower prices and more variety of choice A) each country's marginal cost must equal that of the other country. B) the two countries must engage in international trade with each other. C) the marginal cost of this industry must equal marginal revenue in the other. D) the monopoly must lower prices in order to sell more. E) they must combine to become a multinational corporation

B) the two countries must engage in international trade with each other

8) An industry is characterized by scale economies, and exists in two countries. Should these two countries engage in trade such that the combined market is supplied by one country's industry, then A) consumers in both countries would have higher prices and fewer varieties. B) consumers in the importing country only would have higher prices and fewer varieties. C) consumers in both countries would have more varieties and lower prices. D) consumers in the exporting country only would have higher prices and fewer varieties. E) consumers in both countries would have fewer varieties at lower prices.

C) consumers in both countries would have more varieties and lower prices

21) Under the model of monopolistic competition, a(an) ________ in the number of firms in the industry will cause ________ to ________. A) increase; average price; increase B) increase; average cost; decrease C) increase; markup; decrease D) decrease; markup; decrease E) increase; marginal cost; decrease

C) increase; markup; decrease

8) If a firm increases its output in the ________ and unit costs ________, then the firm is experiencing ________ of scale. A) short-run; decrease; economies B) long-run; decrease; diseconomies C) long-run; decrease; economies D) short-run; decrease; diseconomies E) long-run; increase; economies

C) long-run; decrease; economies

1) Intra-industry trade is most common in the trade patterns of A) the developing countries of Asia and Africa. B) raw material producers. C) the industrial countries of Western Europe. D) China with the rest of the world. E) labor-intensive products.

C) the industrial countries of Western Europe

1) In the model of monopolistic competition, if firms have ________ average cost curves, then opening trade will ________ the total number of firms and ________ the average price. A) downward sloping; decrease; increase B) downward sloping; increase; decrease C) upward sloping; decrease; increase D) downward sloping; decrease; decrease E) upward sloping; increase; decrease

D) downward sloping; decrease; decrease

4) The simultaneous export and import of widgets by the United States is an example of A) increasing returns to scale. B) imperfect competition. C) inter-industry trade. D) intra-industry trade. E) the effect of a monopoly on international trade.

D) intra-industry trade.

14) Intra-industry trade will tend to dominate trade flows when which of the following exists? A) large differences between relative country factor availabilities B) homogeneous products that cannot be differentiated C) constant cost industries D) small differences between relative country factor availabilities E) uneven distribution of abundant resources between two countries

D) small differences between relative country factor availabilities

20) If the market for products produced by firms in a monopolistically competitive industry becomes ________, then there will be ________ firms and each firm will produce ________ output and charge a ________ price. A) smaller; more; less; higher B) smaller; more; less; lower C) smaller; fewer; less; lower D) smaller; fewer; less; higher E) smaller; fewer; more; higher

D) smaller; fewer; less; higher

1) A monopolistic firm A) can sell as much as it wants for any price it determines in the market. B) cannot determine the price, which is determined by consumer demand. C) cannot sell additional quantity unless it raises the price on each unit. D) will never sell a product whose demand is inelastic at the quantity sold. E) will always earn a profit in the long run.

D) will never sell a product whose demand is inelastic at the quantity sold.

7) A firm in long-run equilibrium under monopolistic competition will earn A) positive monopoly profits because each sells a differentiated product. B) positive oligopoly profits because each firm sells a differentiated product. C) negative economic profits because it has economies of scale. D) zero economic profits because of free entry. E) positive economic profit if it engages in international trade.

D) zero economic profits because of free entry

10) A product is produced in a monopolistically competitive industry with scale economies. If this industry exists in two countries, and these two countries engage in trade with each other, then we would expect A) the country in which the price of the product is lower will export the product. B) the country with a relative abundance of the factor of production in which production of the product is intensive will export this product. C) neither country will export this product since there is no comparative advantage. D) the countries will trade only with other nations they are not in competition with E) each country will export different varieties of the product to the other.

E) each country will export different varieties of the product to the other

20) Under the model of monopolistic competition, a(an) ________ in the number of firms in the industry will cause ________ to ________. A) increase; average price; increase B) increase; average cost; decrease C) decrease; markup; decrease D) increase; marginal cost; decrease E) increase; average price; decrease

E) increase; average price; decrease

6) 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) there will be barriers to entry that prevent addition firms from entering the industry. C) the firms will converge production on a standardized product. D) there will be a small number of firms that are very large and the rest will be very small E) long-run profit will be equal to zero.

E) long-run profit will be equal to zero

4) International trade based solely on internal scale economies in both countries is likely to be carried out by A) a relatively large number of price competing firms. B) a relatively small number of price competing firms. C) a relatively small number of imperfect competitors. D) a large number of oligopolists in each country. E) monopolists in each country.

E) monopolists in each country.