Problem 2. A substantial portion of international trade happens between countries with similar char- acteristics and even within the same industry. a) Define intra-industry trade. Do the predictions from the Heckscher-Ohlin model help in explaining intra-industry trade? b) What are the main advantages of intra-industry trade and how may consumers benefit from it? c) Consider the case of a country that simultaneously exports and imports cars. It exports $1.5 billion dollars while importing $2 billion dollars. Compute the Grubel-Lloyd index for the car industry in this country. Briefly comment on it.

Problem 2. A substantial portion of international trade happens between countries with similar char- acteristics and even within the same industry. a) Define intra-industry trade. Do the predictions from the Heckscher-Ohlin model help in explaining intra-industry trade? b) What are the main advantages of intra-industry trade and how may consumers benefit from it? c) Consider the case of a country that simultaneously exports and imports cars. It exports $1.5 billion dollars while importing $2 billion dollars. Compute the Grubel-Lloyd index for the car industry in this country. Briefly comment on it.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter13: General Equilibrium And Welfare

Section: Chapter Questions

Problem 13.10P

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