Two countries engaged in trade in products with no scale economies, produced underconditions of perfect competition, are likely to be engaged inA) Heckscher-Ohlin trade.B) oligopolistic competitionC) monopolistic competition.D) intra-industry trade.E) inter-industry trade.
Question
Two countries engaged in trade in products with no scale economies, produced underconditions of perfect competition, are likely to be engaged inA) Heckscher-Ohlin trade.B) oligopolistic competitionC) monopolistic competition.D) intra-industry trade.E) inter-industry trade.
Solution
Step 1: Understand the question The question is asking about the likely type of trade between two countries that are engaged in trading products with no scale economies and produced under conditions of perfect competition.
Step 2: Define the types of trade Let's define the different types of trade mentioned in the options: A) Heckscher-Ohlin trade: This type of trade is based on the differences in factor endowments between countries. B) Oligopolistic competition: This refers to a market structure where a few large firms dominate the market. C) Monopolistic competition: This refers to a market structure where many firms compete by offering differentiated products. D) Intra-industry trade: This refers to the exchange of similar products between countries. E) Inter-industry trade: This refers to the exchange of different products between countries.
Step 3: Analyze the conditions given The question states that the products being traded have no scale economies and are produced under conditions of perfect competition.
Step 4: Determine the likely type of trade Based on the given conditions, it is unlikely that the trade between the two countries would be characterized by oligopolistic competition or monopolistic competition, as these market structures imply some level of product differentiation or market power.
Heckscher-Ohlin trade is based on differences in factor endowments, which is not mentioned in the given conditions. Therefore, it is also unlikely to be the likely type of trade.
Intra-industry trade involves the exchange of similar products, which is not specified in the question. Therefore, it cannot be determined if this is the likely type of trade.
Inter-industry trade involves the exchange of different products, which is not specified in the question. Therefore, it cannot be determined if this is the likely type of trade.
Step 5: Final answer Based on the given conditions, it is most likely that the two countries are engaged in trade characterized by perfect competition, where products are traded without any specific market structure. Therefore, the answer is not explicitly mentioned in the options provided.
Similar Questions
4. When a country both exports and imports a type of commodity, the country is engaged inA) inter-industry trade.B) an attempt to monopolize the relevant industry.C) increasing returns to scale.D) intra-industry trade.E) imperfect competition
Intra-industry trade will tend to dominate trade flows when which of the following exists?A) large differences between relative country factor availabilitiesB) small differences between relative country factor availabilitiesC) uneven distribution of abundant resources between two countriesD) homogeneous products that cannot be differentiatedE) constant cost industries
A product is produced in a monopolistically competitive industry with scale economies. If thisindustry exists in two countries, and these two countries engage in trade with each other, then wewould expectA) the country with a relative abundance of the factor of production in which production of theproduct is intensive will export this product.B) the countries will trade only with other nations they are not in competition with.C) the country in which the price of the product is lower will export the product.D) neither country will export this product since there is no comparative advantage.E) each country will export different varieties of the product to the other.
A country engaging in trade according to the principles of comparative advantage gains fromtrade because itA) is producing exports indirectly more efficiently than it could alternatively.B) is producing imports indirectly more efficiently than it could domestically.C) is producing exports using fewer labor units.D) is producing imports indirectly using more labor units.E) is producing exports while outsourcing services.
In general, which of the following do NOT tend to increase trade between two countries?A) the existence of well controlled borders between countriesB) larger economiesC) mutual membership in preferential trade agreementsD) historical tiesE) linguistic and/or cultural affinity
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