Larger countries will trade more with one another; this is empirically supported by:
A) intra-industry trade.
B) increasing returns to scale.
C) the gravity equation.
D) the theory of comparative advantage.

Question

Quizplus · Accepted Answer

The gravity equation states that there is a positive relationship between the size of two countries (measured by GDP, population, or other factors) and the amount of trade between them. This relationship has been empirically supported by numerous studies, making option C the best choice. Option A (intra-industry trade) and option B (increasing returns to scale) do not directly relate to the observation that larger countries trade more with one another. Option D (the theory of comparative advantage) is a well-established economic theory, but it does not specifically address the relationship between the size of countries and their trade patterns.

Larger Countries Will Trade More with One Another; This Is