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Chapter 19: Q 14. (page 462)

What are the two main sources of economic gains

from intra-industry trade?

Short Answer

Expert verified

Specialization and economies of scale.

Step by step solution

01

Step 1. Definition

Exchnage of similar products belonging to the same industry is known as intra-industry trade. In other words, imports and exports of same type of products.

02

Step 2. Explanation

There are two main sources of economic gains from Intra industry trade:

1. specialization

2. economies of scale

Firms also benefits by splitting up the value chain and operating different stages of production in different countries of the world at a lower cost.

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Most popular questions from this chapter

Why does the United States not have an absolute

advantage in coffee?

What is intra-industry trade?

How does comparative advantage lead to gains

from trade?

Look at Exercise 19.2. Compute the opportunity

costs of producing sweaters and wine in both France and Tunisia. Who has the lowest opportunity cost of producing sweaters and who has the lowest opportunity cost of producing wine? Explain what it means to have a lower opportunity cost.

How can there be any economic gains for a country from both importing and exporting the same good, like cars?
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