Market structure and international trade

Question 1

Perfect competition

Answer 1

● Perfect market information
● Homogeneous goods and services
● Price-taker

Question 2

Monopolistic competition

Answer 2

● Many non-dominating sellers
● Easy to enter and exit the market freely
● Heterogeneous goods and services

Question 3

Oligopoly

Answer 3

● Few dominant sellers
● Interdependence of firms in pricing strategies
● Imperfect market information

Question 4

Monopoly

Answer 4

● Single seller in the market
● No close substitutes (still faces competition)
● Entry barriers (sources of monopoly power)

Question 5

Absolute advantage

Answer 5

can produce more units of a good than another country with the same amount of resources

Question 6

Comparative advantage

Answer 6

can produce a good at a lower opportunity cost than another country

Question 7

Principle of comparative advantage

Answer 7

If each country specializes in the production of a good with a lower opportunity cost, the total output will increase

Question 8

Effect of exports on current account

Answer 8

Increases

Question 9

Effect of imports on current account

Answer 9

Decreases

Question 10

Foreign currency appreciates against domestic currency (Effect on export price and import)

Answer 10

Export price in terms of domestic currency will increase and the quantity demanded for imports will fall

Question 11

Foreign currency depreciates against domestic currency (Effect on export price and import)

Answer 11

Export price in terms of domestic currency will decrease and the quantity demanded for imports will rise