Which of the following trade patterns is best explained by increasing returns?

Question

Quizplus · Accepted Answer

This trade pattern is best explained by increasing returns because both Japan and the United States are skilled in high-tech industries, such as cars and airplanes. With increasing returns, as the production of one product increases, the cost of producing that product decreases, leading to even greater production and cost savings. Therefore, it makes sense for Japan and the United States to specialize in these high-tech industries and trade with each other, as they can benefit from the cost savings and increased production that come with increasing returns.

Which of the Following Trade Patterns Is Best Explained by Increasing