There is no control over price by firms in: A. oligopoly B. pure (perfect) compe

Question

There is no control over price by firms in: A. oligopoly B. pure (perfect) competition. C. Pure monopoly. D. monopolistic competition. 6. Autos and chemicals are in units of one million Refer to the above tables. If Germany and the United States engage in trade, the terms of trade will be between A. 2 and 4 units of autos for 1 unit of chemicals B. 3 and 4 units of autos for 1 unit of chemicals. C. .33 and .5 unit of autos for 1 unit of chemicals. D. 2 and 4 units of chemicals for 1 unit of autos.

Explanation / Answer

(5) (b)

In pure competition, each firm is a price taker with no control over market price.

(6) (D)

Let's compete opportunity costs (OC).

In Germany,

OC of Autos = 40/20 = 2 Chemicals

OC of chemicals = 20/40 = 0.5 Autos

In US,

OC of autos = 60/15 = 4 chemicals

OC of chemicals = 15/60 = 0.25 Autos

So, Terms of trade will lie between 2 to 4 Chemicals per unit of Auto.

(7) (B)

(8) (C)

A public good can be be freely used by any consumer.

(9) (C)

(10) (B)

In pure competition, MR = MC = Price

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