Lecture notes
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- Module
- SESS0063 International trade
- Institution
- University College London (UCL)
Lecture slides of International trade module
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International TradeBA Course
UCL, SSEES
Lecture 7: Firms in the Global Economy
Idil Uz Akdogan
i.akdogan@ucl.ac.uk
,Lecture Overview
• Monopolistic competition and trade
• The significance of intra-industry trade
• Firm responses to trade: winners, losers, and industry perform
,Introduction
• Internal economies of scale result when large firms have a c
advantage over small firms.
• Internal economies of scale imply that a firm’s average cost
production decreases the more output it produces.
• Perfect competition that drives the price of a good down to
marginal cost would imply losses for those firms because the
would not be able to recover the higher costs incurred from
producing the initial units of output.
, Introduction
• In most sectors, goods are differentiated from each other.
• Integration causes the better-performing firms to thrive
expand, while the worse-performing firms contract.
• Additional source of gain from trade: As production is
concentrated toward better-performing firms, the overall effic
of the industry improves.
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