Question

If nations such as Germany, Japan, and the United States prohibited international trade in automobiles, a likely effect would be that A. automobile producers in the U.S. would collude to produce a large number of cars. B. the excess of price over marginal cost would become less pronounced in the automobile market. C. the price effect would become a more significant consideration for each firm that makes automobiles. D. all countries would become better off.

Answer 1

Answer:

C. the price effect would become a more significant consideration for each firm that makes automobiles.

Explanation:

The situation above is highly related to the topic about "supply" and "demand." If the nations of Germany, Japan and the U.S.A. prohibits the international trade in automobiles, this will result to a surplus of automobile goods within the country. Since these automobiles were meant to be sold abroad, the prohibition will lower its international demand. Such increase in supply will have a significant effect on the price of the automobiles. This is the reason why each firm should have to consider the situation's effect on the price of the automobiles and related goods.

So, this explains the answer.