Please solve the following questions:
1.For each of the following examples, explain whether it is a case of external or internal economies of scale: a. Most musical wind instruments in the United States are produced by more than a dozen factories in Elkhart, Indiana. b. All Hondas sold in the United States are either imported or produced in Marysville, Ohio. c. All airframes for Airbus, Europe’s only producer of large aircraft, are assembled in Toulouse, France. d. Hartford, Connecticut, is the insurance capital of the northeastern United States.
2.Evaluate the relative importance of economies of scale and comparative advantage in causing the following: a. Most of the world’s aluminum is smelted in Norway or Canada. b. Half of the world’s large jet aircraft are assembled in Seattle. c. Most semiconductors are manufactured in either the United States or Japan. d. Most Scotch whiskey comes from Scotland. e. Much of the world’s best wine comes from France.
3.Recently, a growing labor shortage has been causing Chinese wages to rise. If this trend continues, what would you expect to see happen to external economy industries currently dominated by China?
4.Give two examples of products that are traded on international markets for which there are dynamic increasing returns. In each of your examples, show how innovation and learning-by-doing are important to the dynamic increasing returns in the industry.
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