Final answer:
Intra-industry trading allows for specialization and economies of scale, reducing costs per unit and increasing efficiency. External economies of scale are particularly important for competitive advantage and can be fostered through industry clusters. Developing countries can enhance their comparative advantage by investing in infrastructure and education that promote industry clusters and collaborative innovation.
Step-by-step explanation:
Intra-industry trading offers several advantages, including the opportunity for countries to specialize in the production of goods within the same industry, leading to a more efficient allocation of resources. Moreover, intra-industry trade encourages firms to achieve economies of scale, which refer to the cost advantages that enterprises obtain due to scale of operation, with cost per unit of output decreasing with increasing scale.
When discussing the relationship between economies of scale and intra-industry trade, it is important to note that these economies of scale can be both internal and external. Internal economies of scale occur within a firm, as production increases and costs per unit decrease. External economies of scale, often seen in industrial clusters, are achieved when the industry's productivity increases due to the concentration of resources, knowledge, and skills within a geographical area.
For developing countries, one policy implication to acquire comparative advantage in new products or services could be to invest in infrastructure and education that support the development of industry clusters. Another implication is the need for policies that facilitate innovation and collaboration within industries to achieve both internal and external economies of scale.