Question

New Trade Theory implies that the first mover's ability to benefit from increasing returns:

a) Increases over time
b) Decreases over time
c) Remains constant
d) Depends on government policies

Answer 1

The first mover's ability to benefit from increasing returns remains constant in the New Trade Theory.

Step-by-step explanation:

The first mover's ability to benefit from increasing returns in the context of the New Trade Theory remains constant. New Trade Theory suggests that companies that are the first to enter a market or industry can gain a significant advantage through economies of scale and increasing returns to scale. This means that as the company produces more units of a product, its average cost of production decreases, allowing it to offer lower prices and potentially capture a larger market share. For example, a company that is the first to produce electric cars may benefit from increasing returns as it gains experience in manufacturing and distribution, invests in specialized production equipment, and establishes a strong brand. Over time, the company may become more efficient and cost-effective, enabling it to reap greater benefits from economies of scale.