Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 33: Q.23 (page 804)

Does intra-industry trade contradict the theory of comparative advantage?

Short Answer

Expert verified

No

Step by step solution

01

Step 1. Definition

Intra-industry trade refers to the trade of similar products across international borders. Comparative advantage refers to the ability to produce a product at a comparatively lower opportunity cost.

02

Step 2. Explanation 

Intra-industry trade does not contradict comparative advantage rather it broadens its concept. Traditionally, gains from comparative advantage came from climate, geography, education, or skill of workers. But in Intra-industry trade, gains trade comes from specialized learning about specific products and economies of scale.

Comparative advantage can thus be dynamic and change according to the development of new skills and splitting up of the value chain.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

True or False: The source of comparative advantage must be natural elements like climate and mineral deposits. Explain.

If trade increases world GDP by 1% per year, what is the global impact of this increase over 10 years? How does this increase compare to the annual GDP of a country like Sri Lanka? Discuss. Hint: To answer this question, here are steps you may want to consider. Go to the World Development Indicators (online) published by the World Bank. Find the current level of World GDP in constant international dollars. Also, find the GDP of Sri Lanka in constant international dollars. Once you have these two numbers, compute the amount the additional increase in global incomes due to trade and compare that number to Sri Lanka’s GDP.

Are the gains from international trade more likely to be relatively more important to large or small countries?

In World Trade Organization meetings, what do you think low-income countries lobby for?

Under what conditions does comparative advantage lead to gains from trade?
See all solutions

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free