If some industries exhibit internal increasing returns to scale in each country, we should not expect to see
A) intra-industry trade between countries.
B) high levels of specialization in both countries.
C) inter-industry trade between countries.
D) perfect competition in these industries.
E) increased productivity in both countries.

Question

Quizplus · Accepted Answer

Internal increasing returns to scale often lead to imperfect competition because as firms produce more, their average costs decrease, making it hard for new entrants to compete. This is contrary to the assumptions of perfect competition, where there are many firms, each with an insignificant share of the market.

If Some Industries Exhibit Internal Increasing Returns to Scale in Each