The reason why the most efficient firms in a Melitz industry make greater profits under free trade is due to the fact that they A. Operate under increasing marginal costs. B. Operate under FDI. C. Operate under low transport costs. D. Operate under increasing returns to scale.
The reason why the most efficient firms in a Melitz industry make greater profits under free trade is due to the fact that they A. Operate under increasing marginal costs. B. Operate under FDI. C. Operate under low transport costs. D. Operate under increasing returns to scale.
Chapter9: Perfect Competition
Section: Chapter Questions
Problem 3QP
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The reason why the most efficient firms in a Melitz industry make greater profits under free trade is due to the fact that they
A. Operate under increasing marginal costs.
B. Operate under FDI.
C. Operate under low transport costs.
D. Operate under increasing returns to scale.
Explain your answer and support it using a diagram
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