Foreign supply curves facing a large country differ from those facing a small country. Large countries face _____________ foreign supply curves, and small countries face ______________ foreign supply curves.
A) perfectly price elastic; upward-sloping
B) upward-sloping; perfectly price elastic
C) downward-sloping; perfectly price elastic
D) upward-sloping; downward-sloping

Question

Quizplus · Accepted Answer

Large countries can affect world prices by increasing or decreasing demand in international markets. As a result, foreign suppliers adjust their production levels in response to price changes, which creates an upward-sloping supply curve for the large country. However, small countries cannot affect world prices, so they face perfectly price elastic supply curves.

Foreign Supply Curves Facing a Large Country Differ from Those