Why is it that if an industry is operating under conditions of internal scale economies then the resultant equilibrium cannot be consistent with the pure competition model?
What will be an ideal response?
Question 2 - With fixed exchange rates, an increase in the foreign inflation rate, with constant income and domestic credit, will lead to
A) a change in the exchange rate.
B) an increase in international reserves.
C) a decrease in international reserves.
D) no change in international reserves.
Question 3 - The gravity model suggests that over time
A) trade between neighboring countries will increase.
B) trade between all countries will increase.
C) world trade will eventually be swallowed by a black hole.
D) trade between Earth and other planets will become important.
E) the value of trade between two countries will be proportional to the product of the two countries' GDP.
Question 4 - If an economy experiences an increase in its labor force, everything else constant, then its production possibilities frontier (PPF) will
A) expand outward but keep its original shape.
B) expand outward largely in the direction of the labor intensive good.
C) expand outward largely in the direction of the capital intensive good.
D) not expand until capital grows.
Question 5 - A country gains more from international trade the more its terms of trade differ from its autarky price.
Indicate whether the statement is true or false
Question 6 - Which of the following is NOT part of the European Union?
A) Luxembourg
B) Austria
C) Portugal
D) Greece
E) Switzerland
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