Complete 4 pages APA formatted article: International Economics Eurozone. 29). For instance, Germany is considered to have a comparative advantage in the production of cars in the sense that its cars are considered to be of the highest quality in the market. This creates the opportunity for the substitution of products that have the same factor intensity. The other condition for the occurrence of intra-industry trade is that the production processes of particular products should have fixed costs. This is to ensure that an increase in the production processes is advantageous in the sense that there will be a decrease in the unit costs of the product. This condition is beneficial to both producers and consumers. Producers will be able to reduce the cost of production as they engage in mass production. They will enjoy economies of scale in times of low costs of production. Consumers on the other hand will pay less as more cars are being produced because low costs will be transferred to them. For instance, the more units Mercedes produces, the lower the unit cost of production. Possible welfare gains of intra industry trade There are two conditions that determine the occurrence of intra-industry trade and they include comparative advantage and economies of scale.
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