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1. It is conceivable that a country with an industry that exhibits external economies of scale, which the established advantage, would benefit by moving away from free international trade.
True or False?
Explain.
2. Consider a monopolistically competitive industry where firms differ in productivity levels. When the industry opens to international trade, transportation and other transaction costs may determine which firms will remain exclusively in the local market and which firms will become exporters.
Explain with the support of a graph.
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