Author Question: What four decisions must firms with market power make? What will be an ideal ... (Read 44 times)

Metfan725 · **on:** Jun 29, 2018

What four decisions must firms with market power make?

What will be an ideal response?

Question 2

Suppose in the United States, the opportunity cost of producing a motor engine is 4 auto bodies. In Canada, the opportunity cost of producing a motor engine is 2 auto bodies.

a. What is the opportunity cost of producing an auto body for the United States?
b. What is the opportunity cost of producing an auto body for Canada?
c. Which country has a comparative advantage in the production of auto bodies?
d. Which country has a comparative advantage in the production of motor engines?

bigsis44 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

(1.) How much to produce.
(2.) Which technology to use.
(3.) How much of each input to use.
(4.) What price to charge for their product.

Answer to Question 2

a. For the United States, the opportunity cost of producing an auto body is 1/4 of a motor engine.
b. For Canada, the opportunity cost of producing an auto body is 1/2 of a motor engine.
c. The United States has a comparative advantage in the production of auto bodies.
d. Canada has a comparative advantage in the production of motor engines.