Question

If a large firm plans to become more competitive in its market space and has already decreased its production costs using economies of scale, what would happen in relation to its intra-industry trade?

a. It would foster less competition by creating a successful marketing campaign in the US.

b. It would work to expand its competitive products into other countries and offer variety to customers.

c. It would buy more machinery and equipment to produce its products faster.

Answer 1

b. It would work to expand its competitive products into other countries and offer variety to customers.

Intra-industry trade refers to the exchange of similar products belonging to the same industry. Benefits of intra-industry trade is that:

• It increases variety of products in the market from the same industry
• It gives businesses an opportunity to benefit from the economies of scale.
• It also helps in innovation in the industry.