If an exporter's supply curve of a commodity is upward sloping, and if a change in import demands in other countries leads them to increase their exports, other things equal, we would expect
a. the domestic price of the commodity will fall.
b. the domestic price of the commodity will exceed the price in foreign countries.
c. the domestic price of the commodity will be below the price in foreign countries.
d. the domestic price of the commodity will rise.
Question 2
Suppose the production of helicopters is an industry characterized by increasing returns to scale and an Argentine firm, Cicare, is the only player in this market. The firm caters to the global market and earns a profit of 10 million. Flettner, a German firm has been considering entering this market for a while, but it is aware that its entry will cause each firm to lose about 4 million. Although a government subsidy allows Flettner to enter the helicopter market, the company is unable to reap profits in the long run. Which of the following could have led to this outcome?
a. Flettner experienced high production costs due to inadequate supply of inputs.
b. New firms had entered the helicopter industry.
c. The German government ran a balance of payment deficit.
d. The Argentine government retaliated by subsidizing Cicare.
e. There was very low investment in research and development in this industry.
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