Explain cost of production in terms of world trade, International Economics

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Q. If scale economies were not only external to firms, but were also external to individual sites. That is, the larger the worldwide industry (regardless of where plants or firms are located), the cheaper would be the per-unit cost of production. Explain what world trade would look like in this case.

Answer: Most probably every country would specialize in some component of the final product. This would result in greatly observed intra-industry trade.

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