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Chapter 19: Q 13. (page 461)

What is intra-industry trade?

Short Answer

Expert verified

The exchange of similar products belonging to the same industry is known as intra-industry trade.

Step by step solution

01

Step 1. Concept

Trade refers to the exchange of goods, services and capital. When this exchnage takes place between different countries, it is known as international trade.

02

Step 2.

The exchange of similar products belonging to the same industry is known as intra-industry trade. In other words, import and export of same type of products. Intra-industry trade allows firms to learn and innovate on products.

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Most popular questions from this chapter

Consider two countries: South Korea and Taiwan. Taiwan can produce one million mobile phones per day at the cost of \(10 per phone and South Korea can produce 50 million mobile phones at \)5 per phone. Assume these phones are the same type and quality and there is only one price. What is the minimum price at which both countries will engage in trade?

What factors does Paul Krugman identify that

supported expanding international trade in the 1800s?

Why might a low-income country put up barriers

to trade, such as tariffs on imports?

Table 19.15 shows how the average costs of production for semiconductors (the “chips” in computer memories) change as the quantity of semiconductors built at that factory increases.

a. Based on these data, sketch a curve with quantity produced on the horizontal axis and average cost of production on the vertical axis. How does the curve illustrate economies of scale?

b. If the equilibrium quantity of semiconductors demanded is 90,000, can this economy take full advantage of economies of scale? What about if quantity demanded is 70,000 semiconductors 50,000 semiconductors? 30,000 semiconductors?

c. Explain how international trade could make it possible for even a small economy to take full advantage of economies of scale, while also benefiting from competition and the variety offered by several producers.

If the removal of trade barriers is so beneficial to international economic growth, why would a nation continue to restrict trade on some imported or exported products?
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