If the index of intra-industry trade is high, products are probably ______, and costs in both nations are ______.

Question

Quizplus · Accepted Answer

Intra-industry trade refers to the exchange of goods within the same industry between two countries. If the index of intra-industry trade is high, it means that both countries are producing differentiated products that are similar in terms of their quality, features, and characteristics. This suggests that the production processes in both countries are similar and that they have comparable levels of technology and human capital. The costs of production, including labor, capital, and raw materials, are likely to be similar as well. Therefore, the correct answer is B, which states that the products are differentiated and the costs in both nations are similar.

If the Index of Intra-Industry Trade Is High, Products Are