Consider the utility function . If , the elasticity of substitution is equal to 1.
The elasticity of substitution for CES utility functions is .

Suppose that for each firm in the competitive market for potatoes, long-run average cost is minimized at 20¢ per pound when 500 pounds are grown. The demand for potatoes is Q = 10,000/p

If the long-run supply curve is horizontal, then how many firms will this industry sustain in the long run? A) 0 B) 100 C) 50,000 D) There is not enough information to answer.

Government payments given to domestic producers, which reduce the world price of the traded products, are called:

A. Import quotas B. Protective tariffs C. Nontariff barriers D. Export subsidies