Question

Does intra-industry trade contradict the theory of

comparative advantage?

Short answer

This is not right that intra-industry trade contradicts the theory of comparative advantage.

Step-by-step solution

Step 1. Definition

Comparative advantage is defined as the capability of an economy to produce a good or service at a reduced opportunity cost as compared to its trading partners.

Intra-industry trade is defined as the situation where countries interchange or exchange alike products which relate to the same industry.

Step 2. Explanation

No, this is not true. Intra-industry trade does not contradict the theory of comparative advantage. Trade in similar kind of products help in broadening the concept of comparative advantage through higher specialization and economies of scale acheived from splitting the value chain.