Question

When a country both exports and imports a type of commodity, the country is engaged in

a. imperfect competition.
b. inter-industry trade.
c. increasing returns to scale.
d. an attempt to monopolize the relevant industry.
e. intra-industry trade.

Answer 1

Intra-industry trade occurs when a country is involved in both exporting and importing the same types of goods, such as the United States with automobiles, benefiting from economies of scale, competition, and variety.

Step-by-step explanation:

This type of trade occurs when a country is involved in international trade of the same kind of goods or services. For instance, the concept of economies of scale indicates that as a firm's production increases, the average cost of production decreases, allowing countries to specialize in production, gain from economies of scale, and trade with each other to meet the demands for variety and competition within the same industry. An example of this is how the United States both produces and exports automobiles and also imports automobiles, enabling benefits such as economies of scale, increased competition, and greater variety.