Question

What are the two main sources of economic gains from intra-industry trade?

Short answer

With the high degree of specialization and splitting up the value chain and from economies of scale, it resulted into the economic gains for the intra-industry trade.

Step-by-step solution

Step 1. Meaning of intra-industry trade.

It refers to the exchange of similar products belonging to the same industry. The term is usually applied to international trade, where the same types of goods or services are both imported and exported.

Step 2. Two main source of economic gains from intra-industry trade.

a) The learning that comes from a high degree of specialization and splitting up the value chain.

b) Economies of scale that leads to increased output and average lower costs.