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Chapter 33: Q.13 (page 803)

What is intra-industry trade?

Short Answer

Expert verified

Trade of similar products between international boundaries

Step by step solution

01

Step 1. Introduction 

International trade can be defined as the exchange of goods, services and resources across international borders.

02

Step 2. Explanation

Intra-industry refers to the trade of similar products across international borders. A significant portion of international trade is composed of trade between advanced high-income countries. who trade similar products.

Generally, it is assumed that countries specialize in one product and export it to another country and import products they do not specialize in. But when countries export and import the same types of products they gain from a higher degree of specialization, economies of scale, and splitting of the value chain.

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Most popular questions from this chapter

From earlier chapters you will recall that technological change shifts the average cost curves. Draw a graph showing how technological change could influence intra-industry trade.

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

You just overheard your friend say the following: “Poor countries like Malawi have no absolute advantages. They have poor soil, low investments in formal education and hence low-skill workers, no capital, and no natural resources to speak of. Because they have no advantage, they cannot benefit from trade.” How would you respond?

Are differences in geography behind the differences in absolute advantages?

Is it possible to have a comparative advantage in the production of a good but not to have an absolute advantage? Explain.
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