Answer to Question #70483 in Economics for Hussein Darwish

Question

Using a simple model, explain coherently how internal economies of scale give rise to some trade patterns observed in the world today. What are these patterns of trade known as? Your answer should briefly, but adequately, define economies of scale.

Answer 1

When more units of a good or a service can be produced on a larger scale, yet with (on average) fewer input costs, economies of scale (ES) are said to be achieved.
Internal economies of scale occur when the average costs of the firm fall as the representative firm grows larger. This gives rise to globalized trade pattern.