New trade theory stresses that in some cases countries specialize in the production and export of particular products because the world market can support only a limited number of firms.

Question

Quizplus · Accepted Answer

New trade theory argues that in some industries, the world market may only be able to support a limited number of firms due to economies of scale, differentiated products, and/or network effects. This can lead to countries specializing in the production and export of particular products, even if they do not have a comparative advantage in that industry.

New Trade Theory Stresses That in Some Cases Countries Specialize