Alternative Theories Of Trade

Question 1

Intra-industry trade

Answer 1

Import and export of similar goods - driven by product differentiation.

Question 2

Economies of scale

Answer 2

Unit cost decreases as output increases.

Internal - expansion of firm, greater specialisation.
External - relate to size of entire industry within a specific geographic area.

Question 3

Monopoly

Answer 3

Single seller of unique product. Monopoly firm is price maker.

Question 4

Monopolistic competition

Answer 4

Large number of small firms but not identical products. Freedom of entry and exit.

Question 5

Oligopoly

Answer 5

Small number of large firms selling identical/differentiated products. Significant barriers to entry/exit.

Question 6

Global oligopoly

Answer 6

Large firms choose locations to maximise their profits and comparative advantage.