Because the size of the market increases when trade barriers fall, companies can increase their production, which will result in lower costs per unit.This phenomenon is known as ________.
A)trade creation
B)economies of scale
C)diseconomies of scale
D)increased competition

Question

Quizplus · Accepted Answer

The phenomenon described in the question is known as economies of scale, where the production of larger quantities results in lower costs per unit. Trade creation refers to the increase in economic activity and trade that occurs as a result of the elimination of trade barriers between countries. Diseconomies of scale occur when the cost per unit increases with larger production. Increased competition is a separate phenomenon that can occur when trade barriers fall, but it is not directly related to the lower costs per unit described in the question.

Because the Size of the Market Increases When Trade Barriers