12%20Imperfect%20Competition%20and%20Trade - 1 1 Imperfect...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 1 1 Imperfect Competition and Trade Introd uction Economies of Scale The Monopoly Firm 2 Introduction Models of comparative advantage explain trade based on differences in productivity or resources between countries. These models are based on the assumptions of: Perfect competition , and Constant returns to scale . 3 Introduction Two features of international trade that cannot be explained by these models of comparative advantage are: 1. Trade between countries that have similar technologies and resource endowments . 2. The existence of intra-industry trade . 4 Introduction To explain these two features, models will be introduced that includes: Economies of scale, and Differentiated products . 2 5 Economies of Scale Economies of scale in production means that production at a larger scale can be achieved at a lower cost. Also referred to as: Increasing returns to scale , or Decreasing (average) cost . 6 Economies of Scale A Simple Example: Two countries: Home and Foreign Two goods: Cloth and Food Identical production technology in both countries. Identical resources in both countries. 7 Economies of Scale A Simple Example: Identical demands for both goods in both countries....
View Full Document

Page1 / 8

12%20Imperfect%20Competition%20and%20Trade - 1 1 Imperfect...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online