Effect to a Country of Trade Based on External Scale Economies
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It is possible that trade based on external scale economies may leave a country worse off than it would have been without trade? Explain how this could happen.
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The solution discusses the effect to a country of trade based on external scale economics.
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External Scale Economies
The external scale of economies can be determined as the occurrence of economies of scale at the industry level instead of firm level. Trade based on external economies has worse effect on national welfare in comparison of the trade based on comparative advantage or without trade. The external economies of scale affects to whole industry rather than an ...
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