QUESTION 21

A monopolistically competitive firm is in long run equilibrium when its

	a.	marginal cost curve intersects its marginal revenue curve
	b.	marginal revenue curve is tangent to its average total cost curve
	c.	demand curve is tangent to its marginal cost curve
	d.	demand curve is tangent to its average cost curve

QUESTION 22

A tariff in a large country

	a.	always increases home country surplus and decreases foreign country surplus
	b.	always increases home country surplus and has an uncertain effect on foreign country surplus
	c.	has an uncertain on home country surplus but always decreases foreign country surplus
	d.	has an uncertain effect on both home country surplus and foreign country surplus

QUESTION 23

Suppose that initially there is free trade in oil andd the world price is $80. Suppose further that the U.S. places a $10 tariff on imported oil and the price of oil rises to $86 in the U.S. and falls to $76 in the rest of the world. U.S. imports of oil are 20 billion units before the tariff and 10 billion units afterwards. The terms of trade effect of the tariff for the U.S. is equal to

	a.	$40 billion
	b.	$60 billion
	c.	$80 billion
	d.	$120 billion

QUESTION 24

Which model of trade states that a benefit of trade is that trade creates additional product varieties for consumers to choose from?

	a.	Ricardian
	b.	Specific factors
	c.	Heckscher-Ohlin
	d.	Monopolistic competition and increasing returns to scale