Which of the following is likely under free trade and monopolistic competition?
A) Domestic firms will always be provided cash subsidies.
B) Some domestic firms will shut down.
C) Consumers will not benefit at all from trade.
D) Foreign firms will sell the product at a higher price in the export market.

Question

Quizplus · Accepted Answer

Under free trade and monopolistic competition, domestic firms may face competition from foreign firms, which could lead to some domestic firms being unable to compete and eventually shutting down. This is a natural outcome of a competitive market and allows for more efficient allocation of resources. The other choices are unlikely under free trade and monopolistic competition.

Which of the Following Is Likely Under Free Trade and Monopolistic