Small countries might produce more of a particular good than their domestic citizens can consume

Question

Quizplus · Accepted Answer

If there are increasing returns to scale, small countries can produce more of a particular good than their domestic citizens can consume and export the surplus. This allows them to take advantage of their comparative advantage in producing that good and generate income from exports. However, they would only do so if they can do it profitably, hence the need for increasing returns to scale. The other options are not necessarily true for all small countries or for all goods produced.

Small Countries Might Produce More of a Particular Good Than