In the long run, international trade allows a monopolistically competitive firm an opportunity to produce:
A) more output and earn monopoly profits.
B) less output and earn monopoly profits.
C) more output and reduce its average costs.
D) less output and increase its average costs.

Question

Quizplus · Accepted Answer

International trade allows a monopolistically competitive firm to increase its output by reaching a larger market and reducing its average costs through economies of scale. As such, the firm can become more competitive and increase its market share without necessarily earning monopoly profits.

In the Long Run, International Trade Allows a Monopolistically Competitive