EXTERNAL ECONOMIES

1
EXTERNAL ECONOMIES

• Specialized suppliers, labor market pooling,
  knowledge spillovers

2
D
Specialization and Trade
C0
P1
ACargentine
ACisrael
Quantity
D
If Argentine product gets established first, it
may be able to sell belowthe cost that an
individual Israeli firm faces, C0 .
3
D
Losses from Trade
C0
1
P1
ACargentine
2
ACisrael
P2
Quantity
D
If Israel were to block all trade, it will gain
from the fall in price from P1 to P2