Which of the following is likely under free trade and monopolistic
Competition?
A)Domestic firms will always be provided cash subsidies.
B)Some domestic firms will shut down.
C)Consumers will not benefit at all from trade.
D)Foreign firms will sell the product at a higher price in the export market.

Question

Quizplus · Accepted Answer

Under free trade and monopolistic competition, foreign firms are likely to enter the domestic market and compete with domestic firms, leading to some firms shutting down. This is because they are unable to compete with foreign firms who may have cost advantages due to economies of scale or access to cheaper inputs. The other options are unlikely as free trade and competition are intended to benefit consumers and promote efficiency.

Which of the Following Is Likely Under Free Trade and Monopolistic