Firms that initially sell their products in the domestic market before eventually exporting products to take advantage of economies of scale are exhibiting the ___________________ of international trade.

Question

Quizplus · Accepted Answer

The given scenario is an example of the Firm-Level Product Cycle Theory, which explains how firms develop and export their products over time to take advantage of economies of scale, changes in the global demand, and the ability to improve their products. This theory is different from the other options given, as the Product Life Cycle Theory focuses on the different stages of a product's life cycle and their impact on international trade, while the Gravity Theory focuses on the trade patterns between countries based on their economic size and distance. The Long-Term Theory is also not applicable to this scenario, as it mainly deals with the long-term effects of international trade on various aspects of the economy, such as economic growth and income distribution.

Firms That Initially Sell Their Products in the Domestic Market