Question 1

NAFTA includes an agreement that allows trucks from
neighboring countries access to highways on both sides of the
border.Why did it take 17 years for the agreement to be
implemented between the United States and Mexico? And what
actions did Mexico take to facilitate the agreement's
implementation?

Accepted Answer

The answer of NAFTA includes an agreement that allows trucks...

Question 2

Would you say that the gains from NAFTA clearly outweigh its
costs for the United States?

Accepted Answer

The answer of Would you say that the gains from...

Question 3

Why can't the models developed in previous chapters
(Ricardian, specific factors, and Heckscher­Ohlin) be used to
explain trade in intra­industry products?

Accepted Answer

The answer of Why can't the models developed in previous...

Question 4

A monopolistic competitor has fixed costs of $100 and a
constant $1 marginal cost of production.
A) Will this firm earn short­run monopoly profits if it produces
and sells 300 units at a price of $2.00 each?
B) What can we expect to happen to this monopolistic
competitor in the long run?

Accepted Answer

The answer of A monopolistic competitor has fixed costs of...

Question 5

ABC Corporation is a monopolistic competitor.It has fixed costs of $5,000 and a
constant marginal cost of $500 per unit of production.It faces a demand curve
described by this equation:
P = 1,000 - 10Q.
A) Find ABC's equilibrium price and quantity.
B) Will it earn monopoly profits at this equilibrium?
C) What will happen to ABC's price, quantity, and monopoly profits in the long
run?

Accepted Answer

The answer of ABC Corporation is a monopolistic competitor.It has...

Question 6

Can the index of intra­industry trade ever exceed 1.00?

Accepted Answer

The answer of Can the index of intra­industry trade ever...

Question 7

Other things equal, do you expect that the gravity equation will
predict that there will be more trade between the United States
and Canada than between the United States and Argentina?

Accepted Answer

The answer of Other things equal, do you expect that...

Question 8

Has the United States gained or lost from NAFTA?

Accepted Answer

The answer of Has the United States gained or lost...

Question 9

When research and development costs are spread out over
more consumers, it is an example of what?

Accepted Answer

The answer of When research and development costs are spread...

Question 10

Suppose that imports and exports in an industry are both $100
million.If exports rise to $200 million, will the value of the
industry's index of intra­industry trade rise, fall, or remain the
same?

Accepted Answer

The answer of Suppose that imports and exports in an...

Question 11

Explain why the gravity equation for U.S and European trade
may be higher than the gravity equation for U.S.and Canadian
trade even though that the U.S.and Canada share a border.

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The answer of Explain why the gravity equation for U.S...

Question 12

Does the demand curve facing a monopolistic competitor
become more or less elastic when it engages in international
trade? Why?

Accepted Answer

The answer of Does the demand curve facing a monopolistic...

Question 13

The values of the index of U.S.intra­industry trade for small
cars and large passenger aircraft are 40% and 10%,
respectively (Table 6­4 in the textbook).Suggest reasons for
the difference in these values.

Accepted Answer

The answer of The values of the index of U.S.intra­industry...

Question 14

Use this information to answer the following questions: The
GDPs of countries A, B, and C are $1,000, $2,000, and $3,000,
respectively.There are 1,000 miles between country A and
countries B and C.Assume that their markets are
monopolistically competitive.Does the gravity equation predict
that there will be more trade between A and B or between A and
C?

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The answer of Use this information to answer the following...

Question 15

Why would you expect firms with high research and
development costs to be more interested in free trade?

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Question 16

2% reduction in the prices for Mexican imports would save

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The answer of 2% reduction in the prices for Mexican...

Question 17

XYZ Corporation is a monopolistic competitor.It has fixed costs of $1,000
per month and a constant marginal cost of $1 per unit of production.
A) Will it earn a monopoly profit if it produces 1,000 units and sells each
for $1.50?
B) Suppose the demand curve facing XYZ Corporation shifts to the right, so
it now can sell 2,000 units at $1.50 each.Will it now earn a monopoly
profit?
C) Why might XYZ's demand curve shift to the right?
D) What must XYZ do to find its short­run equilibrium price and quantity?

Accepted Answer

The answer of XYZ Corporation is a monopolistic competitor.It has...

Question 18

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The answer of ...

Question 19

The fall in real wages for the maquiladora workers during the
1990s was likely due to what?

Accepted Answer

The answer of The fall in real wages for the...

Quiz 6: Increasing Returns to Scale and Monopolistic Competition

NAFTA includes an agreement that allows trucks from neighboring countries access to highways on both sides of the border.Why did it take 17 years for the agreement to be implemented between the United States and Mexico? And what actions did Mexico take to facilitate the agreement's implementation?

Would you say that the gains from NAFTA clearly outweigh its costs for the United States?

Why can't the models developed in previous chapters (Ricardian, specific factors, and HeckscherOhlin) be used to explain trade in intraindustry products?

A monopolistic competitor has fixed costs of $100 and a constant $1 marginal cost of production. A) Will this firm earn shortrun monopoly profits if it produces and sells 300 units at a price of $2.00 each? B) What can we expect to happen to this monopolistic competitor in the long run?

Can the index of intraindustry trade ever exceed 1.00?

Other things equal, do you expect that the gravity equation will predict that there will be more trade between the United States and Canada than between the United States and Argentina?

Has the United States gained or lost from NAFTA?

When research and development costs are spread out over more consumers, it is an example of what?

Suppose that imports and exports in an industry are both $100 million.If exports rise to $200 million, will the value of the industry's index of intraindustry trade rise, fall, or remain the same?

Explain why the gravity equation for U.S and European trade may be higher than the gravity equation for U.S.and Canadian trade even though that the U.S.and Canada share a border.

Does the demand curve facing a monopolistic competitor become more or less elastic when it engages in international trade? Why?

The values of the index of U.S.intraindustry trade for small cars and large passenger aircraft are 40% and 10%, respectively (Table 64 in the textbook).Suggest reasons for the difference in these values.

Why would you expect firms with high research and development costs to be more interested in free trade?

2% reduction in the prices for Mexican imports would save

The fall in real wages for the maquiladora workers during the 1990s was likely due to what?

Quiz 6: Increasing Returns to Scale and Monopolistic Competition

NAFTA includes an agreement that allows trucks from neighboring countries access to highways on both sides of the border.Why did it take 17 years for the agreement to be implemented between the United States and Mexico? And what actions did Mexico take to facilitate the agreement's implementation?

Would you say that the gains from NAFTA clearly outweigh its costs for the United States?

Why can't the models developed in previous chapters (Ricardian, specific factors, and Heckscher­Ohlin) be used to explain trade in intra­industry products?

A monopolistic competitor has fixed costs of $100 and a constant $1 marginal cost of production. A) Will this firm earn short­run monopoly profits if it produces and sells 300 units at a price of $2.00 each? B) What can we expect to happen to this monopolistic competitor in the long run?

Can the index of intra­industry trade ever exceed 1.00?

Other things equal, do you expect that the gravity equation will predict that there will be more trade between the United States and Canada than between the United States and Argentina?

Has the United States gained or lost from NAFTA?

When research and development costs are spread out over more consumers, it is an example of what?

Suppose that imports and exports in an industry are both $100 million.If exports rise to $200 million, will the value of the industry's index of intra­industry trade rise, fall, or remain the same?

Explain why the gravity equation for U.S and European trade may be higher than the gravity equation for U.S.and Canadian trade even though that the U.S.and Canada share a border.

Does the demand curve facing a monopolistic competitor become more or less elastic when it engages in international trade? Why?

The values of the index of U.S.intra­industry trade for small cars and large passenger aircraft are 40% and 10%, respectively (Table 6­4 in the textbook).Suggest reasons for the difference in these values.

Why would you expect firms with high research and development costs to be more interested in free trade?

2% reduction in the prices for Mexican imports would save

The fall in real wages for the maquiladora workers during the 1990s was likely due to what?

Why can't the models developed in previous chapters (Ricardian, specific factors, and HeckscherOhlin) be used to explain trade in intraindustry products?

A monopolistic competitor has fixed costs of $100 and a constant $1 marginal cost of production. A) Will this firm earn shortrun monopoly profits if it produces and sells 300 units at a price of $2.00 each? B) What can we expect to happen to this monopolistic competitor in the long run?

Can the index of intraindustry trade ever exceed 1.00?

Suppose that imports and exports in an industry are both $100 million.If exports rise to $200 million, will the value of the industry's index of intraindustry trade rise, fall, or remain the same?

The values of the index of U.S.intraindustry trade for small cars and large passenger aircraft are 40% and 10%, respectively (Table 64 in the textbook).Suggest reasons for the difference in these values.