If nations such as Germany, Japan, and the United States prohibited international trade in automobiles, a likely effect would be that

Question

Quizplus · Accepted Answer

If international trade in automobiles were prohibited, domestic firms would face less competition from foreign firms. As a result, domestic firms would have more market power and would likely raise prices. This would increase the importance of the price effect, which is the tendency for higher prices to reduce the quantity demanded of a good. Therefore, choice A is the best answer. The other choices are incorrect because the excess of price over marginal cost would likely increase, other countries would not necessarily become better off, and colluding to produce a large number of cars would violate antitrust laws.

If Nations Such as Germany, Japan, and the United States