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Chapter 8
Firms in the Global Economy: Export
Decisions, Outsourcing, and
Multinational Enterprises
The Theory of Imperfect Competition
Monopoly: A Brief Review
Monopolistic Competition
Monopolistic Competition and Trade
The Effects of Increased Market Size
Gains from an Integrated Market: A Numerical Example
The Significance of Intra-Industry Trade
Case Study: The Emergence of the Turkish Automotives Industry
Firm Responses to Trade: Winners, Losers, and Industry Performance
Performance Differences across Producers
The Effects of Increased Market Size
Trade Costs and Export Decisions
Dumping
Case Study: Antidumping as Protectionism
Multinationals and Outsourcing
Case Study: Patterns of Foreign Direct Investment Flows Around the World
The Firm’s Decision Regarding Foreign Direct Investment
Outsourcing
Case Study: Shipping Jobs Overseas? Offshoring and Unemployment in the United States
Consequences of Multinationals and Foreign Outsourcing
Summary
APPENDIX TO CHAPTER 8: Determining Marginal Revenue
© 2015 Pearson Education Limited
In previous chapters, trade among nations was motivated by their differences in factor productivity or
relative factor endowments. The type of trade that occurred, for example of food for manufactures, is
based on comparative advantage and is called interindustry trade. This chapter introduces trade based on
internal economies of scale in production. Such trade in similar productions is called intraindustry trade
and describes, for example, the trading of one type of manufactured good for another type of manufactured
good. It is shown that trade can occur when there are no technological or endowment differences but when
there are economies of scale or increasing returns in production.
Economies of scale can either take the form of (1) external economies, whereby the cost per unit depends
on the s
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