Consider the monopolistically competitive with increasing returns to scale model of intradindustry trade.

(a)What importance does the market structure make for intraindustry trade to occur?

(b)Why is increasing returns to scale important?

(c)Beginning from an autarky equilibrium for an individual firm in the home country, illustrate and explain the effects in the short run of opening up to trade with the foreign country.

(d)Describe two gains from trade that occur with intraindustry trade