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Chapter 33: Q. 25. (page 804)

Why might intra-industry trade seem surprising from the point of view of comparative advantage?

Short Answer

Expert verified

It might be true that intra-industry trade seem surprising from the point of view of comparative advantage.

Step by step solution

01

Step 1. Meaning of intra-industry trade.

It refers to the exchange of similar products belonging to the same industry. The term is usually applied to international trade where the same types of goods or services are both imported and exported.

02

Step 2. Meaning of comparative advantage.

It is referred to as the ability of the economy to go into the production of the particular commodity at a lesser opportunity cost than its trading allies.

03

Step 3. Intra-industry seem surprising from the point of view of comparative advantage.

Because in the intra-industry trade, the trade is conducted for similar product belonging to the same industry whereas in the comparative advantage it does not included the trade of similar products. It may be surprising if someone thinks that all cars or computers are the same.

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