The New Trade Theory suggests that industries with increasing returns to scale can lead to trade, even between similar countries. A) True B) False

Understand the Problem

The question is asking whether the statement about the New Trade Theory is true or false. It addresses the concept of increasing returns to scale and its role in trade between similar countries, inviting a systematic evaluation of the theory.

More Information

The New Trade Theory suggests that industries with increasing returns to scale can indeed cause trade between similar countries. This is because even without differences in factor endowments, increasing returns can enable trade by allowing specialization and benefiting from economies of scale.

Sources

• Wikipedia - New trade theory - en.wikipedia.org