19. A product is produced in a monopolistically competitive industry with econom

Question

19. A product is produced in a monopolistically competitive industry with economies of scale. Ifthis industry exists in two countries, and these two countries engage in trade, then we wouldexpect

A) that this trade will give consumers access to more varieties.

B) the country with a relative abundance of factor inputs consistent with the factor intensity ofthe product will export this product.

C) neither country will export this product since there is no comparative advantage.

D) the country with lower production costs will export the product.

The correct answer is A.

Please explain it.

Explanation / Answer

Monopolistically competitive industry produces differentitaed products which are close substitutes. With presence in 2 countries the variety or differentiation will increase

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