Intra-industry trade will tend to dominate trade flows when which of the following exists?

Question

Quizplus · Accepted Answer

Intra-industry trade is characterized by the exchange of goods and services within the same industry, between two countries. It tends to dominate trade flows when there are small differences between relative country factor availabilities, which means that countries have similar levels of development, technologies, and resources. In such situations, countries can specialize in producing different varieties or qualities of similar products, enabling them to benefit from economies of scale and specialization, increasing efficiency and competitiveness. This type of trade is most common in industries with large fixed costs or where there are economies of scale that can be exploited by producing a range of similar products, such as cars or electronic goods. Therefore, option B is the correct answer.

Intra-Industry Trade Will Tend to Dominate Trade Flows When Which