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Topic 2: New Trade Theories


1) What is the main message of the new trade theories? : The main message of the new trade theories is that trade need not be the result of comparative advantage. Instead it can result from increasing returns to scale/economies of scale.
2) When do economies of scale occur? : By definition economies of scale occur by definition when increasing the scale of production (or output) leads to a lower per unit cost of production in the long run when all factor inputs can be varied
3) What are the two types of economies of scale? : The two types of economies of scale are internal economies of scale and external economies of scale
4) When do the internal economies of scale occur? : The internal economies of scale occur when the cost per unit of production falls as the size/output of the individual firm in the industry increases
5) When do the external economies of scale occur? : External economies of scale occur when per unit cost of production falls due to increasing size of the industry and not necessarily due to the size of any individual firm
Created on: 5/17/2017
# of questions: 59


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