A large amount of intra-industry trade is not compatible with the comparative-advantage theory of trade.

Question

Quizplus · Accepted Answer

Intra-industry trade occurs when countries simultaneously import and export similar goods within the same industry. This type of trade is often driven by economies of scale, product differentiation, and technology transfer, rather than differences in factor endowments and relative efficiency, which are the main drivers of comparative advantage theory. Therefore, a large amount of intra-industry trade can be inconsistent with the predictions of the theory.

A Large Amount of Intra-Industry Trade Is Not Compatible with the Comparative-Advantage