Question

What are the effects of economies of scale on world trade?

Answer 1

Economies of Scale can be defined as the cost advantage gained by a firm on increasing its level of production. The relationship between per-unit fixed cost and the quantity produce is inverse which gives advantage to the manufacturer.

The economies of scale can generate advantage in the world trade as it reallocates the resources and contributes to raising the world productive efficiency. The flexibility increases and the fixed costs lowers down. This is very beneficial to the economy as a whole. The size of market expands and the profitability increases.