The U.S. is probably the most open international market among the industrialized countries. What then does the U.S. have to gain by joining the WTO?
What will be an ideal response?
There are two answers. First, the U.S. exporters stand to gain profitable markets if foreign protectionism in areas of U.S. comparative advantage (e.g., soy) is removed due to WTO efforts. The second is that the WTO offers the U.S. government administration a counterweight to regional and sectoral interests demanding protection. It is always politically easier to bring about more efficient resource allocations if the complaints of the losers may be deflected by the presence of a binding treaty with an international organization ("our hands are tied").
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Refer to Figure 5.1. All else equal, an increase in the capital stock will cause a
A) shift from PF1 to PF2. B) shift from PF2 to PF1. C) movement up and to the right along PF1. D) movement down and to the left along PF2.
Explain why the following graph is likely to represent the long-run equilibrium for a representative firm in monopolistic competition. What will be the product price, output, and amount of economic profit?
What will be an ideal response?