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Suppose there exists external economies of scale in an industry located in country X. If country...

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Economics

Suppose there exists external economies of scale in an industrylocated in country X. If country X moves from free trade toautarky, it necessarily loses welfare. Explain in detail, using anyrelevant diagrams, whether the above statement is true, false oruncertain.

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4.3 Ratings (688 Votes)
The statement is trueWe will explain it with the help of the following diagramInitially there is free trade The Supply in free trade is shownby Supply open The demand is the domestic demand Theequilibrium point is E1 the price is P1 and quantity is Q1    See Answer
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