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and international trade 2020/9/15 7 Economies of scale ? Under increasing returns to scale: – Output grows proportionately more than the increase in all inputs. – Average costs (costs per unit) decline with the size of the market. 2020/9/15 8 Trade Based on Economies of Scale Attention: 1. Specialization may result from historical accident。 2. Two nations need not be identical in every respect。 3. If economies of scale persist over a sufficiently long range of outputs, leading monopoly[m?‘n?p?li] 壟斷 or oligopoly [,?li‘g?p?li] 寡占 2020/9/15 9 Types of Economies of Scale ? Economies of scale could mean either that larger firms or that a larger industry (., one made of more firms) is more efficient. ? Internal economies of scale occur when the cost per unit of output depends on the size of a firm. ? External economies of scale occur when cost per unit of output depends on the size of the industry. 2020/9/15 10 Intraindustry trade ? Why does intraindustry happen? ? Product differentiation ? Economies of scale ? Measuring intraindustry trade 2020/9/15 11 Indexes of Intraindustry Trade for . Industries, 1993 inanic chemistry無(wú)機(jī)化學(xué) pharmaceutical制藥的 apparel[?39。p230。r?l]服裝 footwear (總稱 )鞋類 2020/9/15 12 Formal model of intraindustry trade (1) Closed Economy 2020/9/15 13 Formal model of intraindustry trade (2) DT MRT PT ACT Open Economy with trade in short run 2020/9/15 14 Formal model of intraindustry trade (3) DT MRT PT=ACT Open Economy with trade in long run 2020/9/15 15 Another version of intraindustry trade model 2020/9/15 16 ? The Krugman Model (1979) Firm i’s labor input The equilibrium of factor market The equilibrium of product market 2020/9/15 17 ? How different Krugman model? endogenous [en39。d?d?in?s]內(nèi)生的 2020/9/15 18 ? Firm?s equilibrium with profit maximization in short run ?In short run: MR=MC ? ?iiTC W l W x??? ? ?11iM R p ?????????0d dc? ?? ? ? ? ? ?22() 1110ipd d d dWdc dc dc dc? ? ?????? ? ? ?? ? ? ? ? ?????? ? ? ???2020/9/15 19 Firm?s equilibrium in long run ? ?i i ip x W x????T R T C?iipW Lc? ??? (ZZ curve) 2020/9/15 20 The Krugman PPZZ model iiLLnlx???? ?iiLc x?1incL? ?? ?The number of firm or product: 2020/9/15 21 Effects of trade in PPZZ Model Conclusion: ?Lower price, more Varieties種類 。 ?More productivity ?Trade patterns is Indetermi