Which of the following factors could potentially cause intra-industry trade?
A) the existence of significant economies of scale
B) R&D being an important input into the production process
C) the operation of the sunspot cycle
D) both A and B
E) both B and C

Question

Quizplus · Accepted Answer

Intra-industry trade refers to the exchange of similar products belonging to the same industry. This type of trade can be driven by the existence of significant economies of scale (A) and the importance of research and development (R&D) as an input into the production process (B). Economies of scale can lead to specialization and a focus on a narrower range of products, while R&D can result in product differentiation, both of which encourage intra-industry trade. The sunspot cycle (C) is unrelated to the economic factors driving intra-industry trade.

Which of the Following Factors Could Potentially Cause Intra-Industry Trade