Linder's hypothesis that consumers prefer to choose from a variety of goods with slightly different characteristics:
A) can explain intra-industry trade.
B) means that countries with different standards of living will tend to trade iron for pharmaceuticals.
C) is an explanation for factor-price equalization.
D) is an explanation for differences in the cost of production among countries.
E) has been empirically shown to be incorrect.

Question

Quizplus · Accepted Answer

Linder's hypothesis suggests that countries with similar demand structures will trade goods amongst themselves, even if these goods are of the same type but with slight variations. This explains the phenomenon of intra-industry trade, where countries export and import similar goods, such as cars of different models or electronics with slightly different features.

Linder's Hypothesis That Consumers Prefer to Choose from a Variety