Describe the two sources of economies of scale and how these economies of scale lead to intraindustry trade
What will be an ideal response?
Internal economies of scale come from decreasing average costs as production increases. The source of the decrease in average costs could be the spread of fixed costs over a greater number of units of output, which might come from plant size, significant research and development costs, marketing or market research costs, engineering, etc. Increasing the size of the firm's market decreases average production costs. Consumers benefit from more choices and lower prices. Product differentiation is enhanced through the introduction of a foreign firm's products in the domestic market. External economies of scale come from a concentration of an industry in a specific geographic location. There is no cost advantage to the firm being larger, but because the industry is focused in a specific location, labor and other input markets are deep and highly specialized. Firms benefit from knowledge spillover in both formal and informal ways.
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If one firm in a duopoly increases its production by one unit beyond the monopoly output, that firm's profit ________, the other firm's profit ________, and the total profit of the duopoly ________
A) increases; increases; increases B) does not change; does not change; does not change C) increases; decreases; does not change D) increases; does not change; increases E) increases; decreases; decreases
It is only among the least skilled and least experienced members of the labor force that minimum-wage laws cause unemployment
a. True b. False Indicate whether the statement is true or false
Efficiency wages
a. raise the productivity of a firm's workers, so the firm hires more workers. b. raise the productivity of a firm's workers, so the firm hires fewer workers. c. reduce the productivity of a firms' workers, so the firm hires more workers. d. reduce the productivity of a firm's workers, so the firm hires fewer workers.
Suppose that a nation can only make two products: defense goods and civilian goods. In a graph of the marginal benefit (MB) and marginal cost (MC) of defense goods, a leftward shift of the MB curve will cause the optimal quantity of:
A. Civilian goods to decrease B. Both civilian goods and defense goods to decrease C. Defense goods to decrease D. Defense goods to increase