If demand for a seller's product is perfectly elastic, which of the following is true?
i. The firm will sell no output if it sets the price its product above the market price.
ii. There are many perfect substitutes for the seller's product.
iii. The firm will sell no output if it sets the price its product below the market price.
A) i only
B) ii only
C) iii only
D) i and ii
E) ii and iii
D
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If there is a surplus
A) fewer producers want to sell the product because it is too scarce. B) consumers will drive up the price further. C) firms will drive up the price to enhance profits. D) the price will decline to the equilibrium level.
With the help of a suitable diagram, explain how in a two-country, two-commodity model one of the countries may fail to specialize completely despite enjoying comparative advantage in one of the goods.
What will be an ideal response?