To analyze intraindustry trade, we must bring in imperfect
Competition, and we change our assumptions about our trade
Models to allow:
A)priceconscious consumers.
B)shortrun unemployment.
C)differentiated products.
D)perfect competition.

Question

To analyze intra­industry trade, we must bring in imperfect
Competition, and we change our assumptions about our trade
Models to allow:
A)price­conscious consumers.
B)short­run unemployment.
C)differentiated products.
D)perfect competition.

Quizplus · Accepted Answer

Intra-industry trade occurs when countries trade similar products within the same industry, which implies that products are differentiated. Therefore, we need to assume differentiated products in order to analyze intra-industry trade. Option A is incorrect because price-conscious consumers are a characteristic of perfect competition. Option B is irrelevant to the analysis of intra-industry trade. Option D is also incorrect because perfect competition does not allow for differentiated products, which is a requirement for intra-industry trade.

To Analyze Intra­industry Trade, We Must Bring in Imperfect

To Analyze Intraindustry Trade, We Must Bring in Imperfect