If the world price for a good exceeds the before-trade domestic price for a good, then that country must have a comparative advantage in the production of the good.
The domestic price level represents the current price of a particular good or service in an economy. Government agencies or national economists tend to look at different price levels to gauge how prices rise or fall, which is economically known as inflation and deflation, respectively.
- If the world price is lower than the domestic price of a good in a country, allowing free trade will reduce that country's total surplus. When the world price of a good is lower than the domestic price of a good, the imposition of a tax on an imported good will increase the total surplus in the market.
- Economic pricing theory asserts that in a free market economy, market prices reflect the interaction between supply and demand: prices are set to match the quantity supplied and the quantity demanded.
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Answer:
Consumers would not keep buying ice cream at $2.75 because after purchasing a certain amount of ice cream, utility would be maximised and consumers would not value ice cream at $2.75 anymore. Consumers would not purchase a product it the marginal utility that would be derived from consuming the product is less than the price.
According to the law of diminishing marginal utility, as more units of a product is increased, total utility increases but at a decreasing rate.
Explanation:
Marginal utitiy is the increase in utility that is derived from consuming one more unit of a product.
Answer:
Unlike perfectly competitive firms, in the long run monopolistically competitive firms face excess capacity or unused capacity. They produced at a higher cost which implies wastage of resources or under-utilization of resources.
Answer:
A) $514,000.
Explanation:
Operating income = Gross profit - Operating expenses
Operating income = $629,000 - $115,000
Operating income = $514,000
