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goods that are not quite identical完全相同的 . – Its welfare effect is ambiguous不明確的 : ? It wastes resources in transportation. ? It creates some petition. Dumping 2020/9/15 26 External economies and international trade ? Economies of scale that occur at the level of the industry instead of the firm are called external economies. ? There are three main reasons why a cluster群 ,組 of firms may be more efficient than an individual firm in isolation: – Specialized suppliers – Labor market pooling集聚 – Knowledge spillovers外 溢 2020/9/15 27 External Economies and Specialization Historical accident With large external economies, the pattern of trade can?t be determined on the basis of lower actual or potential average cost. 2020/9/15 28 ? Dynamic Increasing Returns – Learning curve ? It relates unit cost to cumulative output. ? It is downward sloping because of the effect of the experience gained though production on costs. – Dynamic increasing returns ? A case when costs fall with cumulative production over time, rather than with the current rate of production. – Dynamic scale economies justify protectionism. ? Temporary protection of industries enables them to gain experience (infant industry argument). Dynamic external economies and specialization 2020/9/15 29 The learning curve and specialization Learning curve The only way for N2 to enter the market is to take the measure of the infant industry polices. 2020/9/15 30 – Assumptions: ? There are two countries: Home (the capitalabundant country) and Foreign. ? There are two industries: manufactures (the capitalintensive industry) and food. ? Neither country is able to produce the full range of manufactured products by itself due to economies of scale. Economies of Scale and Comparative Advantage 2020/9/15 31 Trade in a World Without Increasing Returns Home (capital abundant) Foreign (labor abundant) Manufactures Food 2020/9/15 32 Trade with Increasing Returns and Monopolistic Competition Home (capital abundant) Foreign (labor abundant) Manufactures Food Interindustry trade Intraindustry trade 2020/9/15 33 – Main differences between interindustry and intraindustry trade: ? Interindustry trade reflects parative advantage, whereas intraindustry trade does not. ? The pattern of intraindustry trade itself is unpredictable, whereas that of interindustry trade is determined by underl