advantage of economies of scale? What about if quantity demanded is 70,000 semiconductors? 50,000

semiconductors? 30,000 semiconductors?

c. Explain how international trade could make it possible for even a small economy to take full advantage

of economies of scale, while also benefiting from competition and the variety offered by several

producers.

Quantity of Semiconductors Average Total Cost

10,000

20,000

30,000

40,000

100,000

TABLE 19.15

$8 each

$5 each

$3 each

$2 each

$2 each

7. If the removal of trade barriers is so beneficial to international economic growth, why would a nation

continue to restrict trade on some imported or exported products?

Review Questions

8. What is absolute advantage? What is comparative advantage?

9. Under what conditions does comparative advantage lead to gains from trade?
468 19 • Critical Thinking Questions

10. What factors does Paul Krugman identify that supported expanding international trade in the 1800s?
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