In the long run, a monopolistically competitive firm that trades internationally will ____________than it would in autarky.
A) produce more output
B) earn more monopoly profits
C) have higher average costs
D) produce more output and earn more monopoly profits

Question

Quizplus · Accepted Answer

In the long run, a monopolistically competitive firm that trades internationally will produce more output than it would in autarky. This is because trade allows the firm to access new markets and increase its customer base, leading to greater demand for its product. As a result, the firm will increase its production to meet this higher level of demand. However, the firm may not earn more monopoly profits or have higher average costs because increased competition from foreign firms may limit its market power.

In the Long Run, a Monopolistically Competitive Firm That Trades