If production is subject to economies of scale, how might trading patterns be characterized?

Question

Quizplus · Accepted Answer

If production is subject to economies of scale, countries can gain from trade if each nation specializes. This means that each country will specialize in producing those goods in which it has a comparative advantage, and will import goods in which it has a comparative disadvantage. This will lead to greater efficiency and lower costs of production, which will result in overall economic gains for both countries. Therefore, choice (A) is the best option. Choices (B) and (C) are not appropriate because it is unlikely that one country will have an absolute or comparative advantage in the production of all goods. Choice (D) is incorrect because trade can benefit countries even when production is subject to economies of scale.

If Production Is Subject to Economies of Scale, How Might