If a firm's output more than doubles when all the inputs are doubled, production is said to occur under conditions of
increasing returns to scale.
imperfect competition.
intra-industry equilibrium.
constant returns to scale
decreasing returns to scale
One advantage of the specialization that results from international trade is that countries can take advantage of
scale economies
production diversification
smaller countries.
taste reversals.
lower transport costs.
If a firm's output doubles when all inputs are doubled, production is said to occur under conditions of
decreasing returns to scale.
If a firm's output less than doubles when all inputs are doubled, production is said to occur under conditions of
The existence of external economies of scale
may be associated with a perfectly competitive industry
cannot be associated with a perfectly competitive industry.
tends to result in one huge monopoly.
tends to result in large profits for each firm.
focuses more on individual firms than the industry as a whole.
The existence of internal economies of scale
cannot be associated with a perfectly competitive industry
may be associated with a perfectly competitive industry.
is associated only with sophisticated products such as aircraft.
cannot form the basis for international trade.
focuses more on the industry than individual firms.
When there are external economies of scale, an increase in the size of the market will
increase the number of firms and lower the price per unit.
increase the number of firms and raise the price per unit.
decrease the number of firms and raise the price per unit.
decrease the number of firms and lower the price per unit.
not affect the number of firms, but will lower the price per unit.
If some industries exhibit internal increasing returns to scale in each country, we should not expect to see
perfect competition in these industries
intra-industry trade between countries.
inter-industry trade between countries.
high levels of specialization in both countries.
increased productivity in both countries.
External economies of scale arise when the cost per unit
falls as the industry grows larger and rises as the average firm grows larger.
rises as the industry grows larger and falls as the average firm grows larger.
falls as the industry and the average firm grows larger.
remains constant over a broad range of output.
rises as the industry and the average firm grows larger.
Internal economies of scale arise when the cost per unit
falls as the average firm grows larger.
rises as the industry grows larger.
falls as the industry grows larger.
rises as the average firm grows larger.
remains constant over a broad range of output
Where there are internal economies of scale, the scale of production possible in a country is constrained by
the size of the domestic plus the foreign market
the size of the country.
the size of the trading partner's country.
the size of the domestic market.
the size of the foreign market.
Internal economies of scale will ______________________ average cost when output is __________ by ________________.
reduce; increased; a firm
increase; increased; a firm
reduce; increased; the industry
increase; increased; the industry
reduce; reduce; the industry
External economies of scale will ___________ average cost when output is _______________ by __________________.
External economies of scale often arise because similar firms
locate in the same geographic region
collude to fix prices and increase profits.
have excellent internal logistics.
agree to cooperate to expand global trade.
have economies of scale in production.
The Internet has made transactions between businesses (B2B trading) fast and easy. Any business in any location can access specialized knowledge, labor, and materials. It is likely that these virtual economic communities will result in
external economies of scale
internal economies of scale.
consolidation of industries into a small number of powerful firms.
suppression of innovations and collusive behavior, driving up prices.
government intervention and regulation.
The long-run market supply curve in the presence of internal economies of scale is ________, and in the presence of external economies of scale, it is ________.
downward sloping; downward sloping
upward sloping; horizontal
horizontal; upward sloping
downward sloping; horizontal
upward sloping; downward sloping
If output is increased in the long-run, average production costs in the presence of internal economies of scale will ________, and in the presence of external economies of scale, will ________.
decrease; decrease
increase; remain constant
remain constant; increase
decrease; remain constant
increase; decrease
If the firms in a market have constant returns to scale internally while there are external economies of scale for the industry, a firm's long-run supply curve will be ________ and the long-run market supply curve will be ________.
horizontal; downward sloping
If output is increased in the long-run, then in the presence of internal economies of scale the number of firms will ________, and in the presence of constant external returns to scale the number of firms will ________.
If output is increased in the long-run, average production costs in the presence of internal diseconomies of scale will ________, and in the presence of external diseconomies of scale, will ________.
If two countries begin trade and both produce a product subject to external economies of scale, then the country with the ________ rate of production will ________ production until it controls ________ of the market
higher; increase; 100%
higher; increase; 50%
lower; increase; 100%
lower; increase; 50%
higher; decrease; 0%
In the presence of external economies of scale, trade
may or may not improve welfare in both countries.
will unambiguously improves welfare in both countries.
will unambiguously worsens welfare in both countries.
will unambiguously worsen welfare in the exporting country and improve welfare in the importing country.
will unambiguously improve welfare in the exporting country and worsen welfare in the importing country.
A learning curve relates ________ to ________ and is a case of ________ returns.
unit cost; cumulative production; dynamic increasing returns
output per time period; long-run marginal cost; dynamic increasing returns
unit cost; cumulative production; dynamic decreasing returns
output per time period; long-run marginal cost; dynamic decreasing returns
labor productivity; education; increasing marginal returns
The learning curve describes the ________ relationship between ________ and ________.
inverse; unit cost; cumulative output
direct; unit cost; cumulative output
inverse; education; annual income
direct; education; annual income
direct; education; labor productivity
If two countries begin trade and both produce a product subject to internal economies of scale, then the country with the ________ rate of production will ________ production until it controls ________ of the market.
Restaurant meals are an example of a ________ good and clothing is an example of a ________ good. The pattern of interregional trade is determined primarily by ________.
nontraded; traded; external economies.
traded; nontraded; internal economies
nondurable; durable; natural resource
durable; nondurable; natural resources
consumer; style; population
The share of ________ goods in employment is ________ across the country. The share of ________ goods in employment is ________ across the country.
nontraded; uniform; traded; variable
traded; uniform; nontraded; variable
durable; uniform; nondurable; variable
nondurable; uniform; durable; variable
nontraded; variable; traded; uniform
Patterns of interregional trade are primarily determined by ________ rather than ________ because factors of production are generally ________.
external economies; natural resources; mobile
internal economies; external economies; mobile
external economies; population; immobile
internal economies; population; immobile
population; external economies; immobile
The primary determinant of patterns of interregional trade is
accidents of history.
resource allocations.
factor abundance.
weather.
centralized optimization.
The study of factors that influence both international and interregional trade is referred to as
economic geography.
factor abundance theory.
weather analysis.
