1E 101: Short Note – 5. Economies of Scale & Trade (* Lectures are mainly based on our textbook, Krugman’s International Economics: Theory and Policy. Thorough reading of the text in addition to active participation in classes is strongly recommended. This note is just a short list of topics we discuss in class for your reference.) II. New Trade Theory: Imperfect Competition & Trade 1. Imperfect competition and intra-industry trade O Source of Imperfect Competition: Economies of Scale •External economies of scaleoccur when cost per unit of output depends on the size of the industry. •Internal economies of scaleoccur when the cost per unit of output depends on the size of a firm.
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