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.

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter9: Perfect Competition

Section: Chapter Questions

Problem 3QP

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Question

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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