lec08-eco101-10

lec08-eco101-10 - InternationalTrade Lecture8 c...

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Unformatted text preview: InternationalTrade Lecture8 c Marc-AndreasMuendler UniversityofCalifornia,SanDiego October21,2010 8.ImperfectCompetitionandMarketSegmentation Econ101, c M.Muendler ClassicTradeversusIntra-industryTrade Perfectcompetitiondoesnotprevailinpractice.Itcanbecausedby marketimperfectionsoreconomiesofscale Scaleeconomiesandincreasingreturnsinproductionconstitutea furtherreasonfortrade:Firmscentralizeproductionandexport External economiesofscaleandexternalitiesconstituteareasonto restricttrade:Infantindustriesmaydeserveprotection Imperfectcompetitionisnecessarytorewardinnovatorsandthere- forecloselytiedto endogenous growth 8.ImperfectCompetitionandMarketSegmentation Econ101, c M.Muendler InternalEconomiesofScale ClassicTradeTheory:ConstantReturnstoScale IncreasingReturnstoScale.Synonym: Internal EconomiesofScale When all factorsusedinproductionareincreasedby b percent, outputgrowsby more than b percent Whenoutputisincreasedby B percent,totalcostsgrowby less than B percent(averagecostsdecline) Productionismoreefficientatlargerscale 8.ImperfectCompetitionandMarketSegmentation Econ101, c M.Muendler ConstantReturnstoScale Capital Labor Output Capital Functionalform: Y = L K 1- (for = 1 / 2 ) 8.ImperfectCompetitionandMarketSegmentation Econ101, c M.Muendler ConventionalIncreasingReturnstoScale Capital Labor Output Capital Functionalform: Y = L K (for = =1 . 4 ) 8.ImperfectCompetitionandMarketSegmentation Econ101, c M.Muendler IncreasingReturnstoScalefromFixedCosts Capital Labor Output Capital Functionalform: Y = L K 1- - F (for = 1 / 2 and F =2 , 000 ) 8.ImperfectCompetitionandMarketSegmentation Econ101,...
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lec08-eco101-10 - InternationalTrade Lecture8 c...

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