Under some circumstances,trade could stifle the development of new industries and reduce global efficiency.All of the following describe conditions that could lead to that situation except
A)an initial head start gives a scale advantage to already existing firms in one country.
B)diseconomies of scale make it impossible for new firms to enter the market.
C)a location has a better-developed linkage between suppliers and producers, giving it a cost advantage.
D)a historical accident, such as the shifting of airplane production to the United States to avoid World War II bombings, causes firms in one location to have a competitive advantage.

Question

Quizplus · Accepted Answer

If there are diseconomies of scale, it means that as production increases, the average cost per unit increases as well. This makes it difficult for new firms to enter the market and compete with established firms. Therefore, it would not result in stifling the development of new industries. Options A, C, and D describe situations where an existing advantage (either technological, economic, or historical) creates a barrier to entry for new industries or firms, leading to reduced efficiency.

Under Some Circumstances,trade Could Stifle the Development of New Industries