Because firms in perfectly competitive markets can sell any quantity without driving down prices, they should:
A. produce as much as possible to maximize profits.
B. produce at the lowest cost per unit to maximize profits.
C. increase quantity until the additional profit it earns on its last unit sold is zero.
D. try to flood the market.
Answer: C
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Use the following graph, where Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product, to answer the next question.
Sd + Q is the product supply curve after an import quota is imposed. The effect of the import quota on domestic price and domestic consumption is
A. the same as that of a tariff of Pa?Pt. B. the same as that of a tariff of Pt?Pc. C. to raise price higher and lower consumption further than a tariff of Pt?Pc. D. the same as that of a tariff of Pa?Pc.
When the prices of a country's imports increase, the prices of domestic goods may increase. This occurs because
A. an increase in the prices of imported inputs will cause aggregate supply to increase. B. an increase in the prices of imported inputs will cause aggregate demand to decrease. C. if import prices rise relative to domestic prices, households will tend to substitute domestically produced goods and services for imports. D. if import prices rise relative to domestic prices, households will tend to substitute imports for domestically produced goods and services.