/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Q5 How can there be any economic ga... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 19: Q5 (page 461)

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

Short Answer

Expert verified

There can be economic gains for intra industry trade, based on specialisation & economies of scale, as per Krugman Model.

Step by step solution

01

Intra Industry Trade Definition

It refers to international trade of goods from the same industry.

Eg : Many developed rich countries both produce & export autos, and also import autos.

02

Economic Gain concept

Economic Gain is the gain in efficiency & social product, utility.

Intra Industry trade leads to economic gains in countries with similar economic welfare levels, in following ways as explained by Krugman New Trade Theory

  • Division and specialisation of labor : because labor is deeply imbibed in diligent small portions of work processes, related to production of a well defined good.
  • Economies of Scale : because a brand's standardised production is likely to be concentrated at one location with huge quantities' production.

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.

Over 30 million students worldwide already upgrade their learning with 91影视!

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

In France it takes one worker to produce one sweater, and one worker to produce one bottle of wine. In Tunisia it takes two workers to produce one sweater, and three workers to produce one bottle of wine. Who has the absolute advantage in production of sweaters? Who has the absolute advantage in the production of wine? How can you tell?

Do consumers benefit from intra-industry trade?

Are differences in geography behind the

differences in absolute advantages?

Review the numbers for Canada and Venezuela from Table 19.12 which describes how many barrels of oil and tons of lumber the workers can produce. Use these numbers to answer the rest of this question.

a. Draw a production possibilities frontier for each country. Assume there are 100 workers in each country. Canadians and Venezuelans desire both oil and lumber. Canadians want at least 2,000 tons of lumber. Mark a point on their production possibilities where they can get at least 3,000 tons.

b. Assume that the Canadians specialize completely because they figured out they have a comparative advantage in lumber. They are

willing to give up 1,000 tons of lumber. How much oil should they ask for in return for this lumber to be as well off as they were with no trade? How much should they ask for if they want to gain from trading with Venezuela? Note: We can think of this 鈥渁sk鈥� as the relative price or trade price of lumber.

c. Is the Canadian 鈥渁sk鈥� you identified in (b) also beneficial for Venezuelans? Use the production possibilities frontier graph for Venezuela to show that Venezuelans can gain from trade.

Under what conditions does comparative advantage

lead to gains from trade?
See all solutions

Recommended explanations on Economics Textbooks

Taxation Economics

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.