Final answer:
Single market manufacturers want to be closer to markets to reduce transportation costs and to understand consumer behaviors better, allowing for product customization. The economic benefits of this approach include efficiencies from economies of scale and specialization, which lead to innovation and cost reduction in high-income economies engaged in intra-industry trade.
Step-by-step explanation:
Single market manufacturers are companies that produce goods for a specific market or a set group of countries. These manufacturers may want to be closer to markets than inputs for several reasons. Firstly, being close to the market can reduce transportation costs and lead time, improving the company's responsiveness to market changes and customer demand. Secondly, manufacturers may benefit from being close to a concentration of consumers which can offer insights into consumer behavior and preferences, allowing for better product customization and greater brand loyalty.
Economies of scale and specialization in production are the main economic benefits for similar high-income economies engaging in intra-industry trade. By concentrating on specific areas of production, firms can become more efficient, reduce costs, and improve product quality, leading to gains in learning and innovation. Additionally, they can produce in greater volumes, which further reduces costs per unit, making them more competitive.
For instance, a U.S. company might specialize in manufacturing aerospace machinery while importing machinery for textile production from Germany, where firms have developed a unique expertise in that area. This intra-industry trade allows each country to leverage their respective specializations and benefit from economies of scale.