If two countries begin trade and both produce a product subject to internal economies of scale,then the country with the ________ rate of production will ________ production until it controls ________ of the market.
A) higher; increase; 100%
B) higher; increase; 50%
C) lower; increase; 100%
D) lower; increase; 50%
E) higher; decrease; 0%

Question

Quizplus · Accepted Answer

When two countries trade and both produce a product with internal economies of scale, the country with the higher rate of production will increase production to exploit its cost advantage, potentially controlling 100% of the market.

If Two Countries Begin Trade and Both Produce a Product