Exam 6: Increasing Returns to Scale and Monopolistic Competition

The demand equation for a good produced by a monopolistically competitive firm is P = 10 - Q. If the firm's marginal cost is a constant $2 per unit, what price will it charge and how many units will it produce if it maximizes its profits?

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. I. Will it earn a monopoly profit if it produces 1,000 units and sells each for $1.50? II. 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? III. Why might XYZ's demand curve shift to the right? IV. What must XYZ do to find its short-run equilibrium price and quantity?

The ____________ model best explains intra-industry trade.

Suppose the U.S. imports more computers than it exports, and that the index of intra-industry trade in the U.S. computer industry increases from 0.25 to 0.50. Assuming no change in U.S. computer imports, does this increase mean that the U.S. computer industry exports more or less computers?

(Figure: Costs and Demand for a Monopolistic Competitor) The total cost of producing the profit-maximizing output is:

If there is a duopoly and the products are identical (homogeneous), the firm selling the product for a lower price will:

Which of the following is characteristic of a monopolistically competitive industry?

Economist Jan Tinbergen developed a formula, called ______, to predict which nations would engage in bilateral trade.

The demand equation for a good produced by a monopolistically competitive firm is P = 10 - Q. At what price is the firm's total revenue maximized?

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?

(Table: Distances and GDP) According to the gravity equation, which country should be the United States' largest trade partner?

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?

Which of the following is NOT a short-run opportunity that international trade provides for a monopolistically competitive firm?

Studies of U.S.-Canadian free trade have concluded that free trade produced what effect on Canadian firms?

When there are increasing returns to scale, average costs must be:

Suppose that industry X and industry Y have intra-industry trade indexes equal to 0.80 and 0.20, respectively. Which of the following is then correct?

NAFTA benefited Canadian consumers because of:

A recap of the effects of NAFTA for its first nine years reveals some adjustment costs were offset by:

NAFTA is believed to have __________ manufacturing productivity, especially in the maquiladora plants.

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