Question: Whether or not it is efficient for a country to maintain barriers to trade in an industry that exhibits economies of scale depends upon the
Whether or not it is efficient for a country to maintain barriers to trade in an industry that exhibits economies of scale depends upon the marginal costs and marginal benefits of maintaining those barriers. Having significant economies of scale does mean that average costs of production will be lower at higher levels of production;
however, trade restrictions might mean that the industry is able to inflate its costs. (LO10-3)
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