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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

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?

Table 19.15 shows how the average costs of production for semiconductors (the 鈥渃hips鈥� 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.

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

You just overheard your friend say the following: 鈥淧oor 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.鈥� How would you respond?

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