... second reason for international trade to be advantageous lies on the existence of economies of scale in production. Economies of scale means that more output in a long run industry can be achieved at a lower cost. It is also a source of comparative advantage. This means countries can specialise in producing goods where they have developed economies of scale. In this case, countries that are almost identical in all respects can also find advantages to trade. As we all know, most developed countries like the US, Japan and the European Union, have similar technologies, endowments and to some extent similar preferences. However, trade between them makes up a significant share of world trade thanks to the economies of scale. Therefore, world productive efficiency can be improved and more benefits will be gained by trading countries. Next, international trade allows consumers much wider choice about the product they buy. More varieties ...

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