Which model best explains the cross-trade of very similar products exported and imported by trading partners?
A) Ricardian
B) Heckscher-Ohlin
C) specific-factors
D) monopolistic competition

Question

Quizplus · Accepted Answer

The monopolistic competition model best explains the cross-trade of very similar products because it accounts for the differentiation of products and the scale economies in production, which are key factors in such trade patterns. This model suggests that even with very similar products, countries can find niches where they have a competitive advantage, leading to both imports and exports of these products.

Which Model Best Explains the Cross-Trade of Very Similar Products