Q.Explain briefly why economies of scale is a reason for engaging in international trade.

Economies of scale connects the size of the market a firm can sell into with its average cost of production, which is exactly why access to foreign markets matters for cost efficiency.

Economies of scale refers to the fall in average cost per unit of output that occurs when a firm produces at a larger volume, because fixed costs such as plant, machinery, and research and development spending are spread across a greater number of units. A firm that sells only within its home country is limited by the size of the domestic market, and beyond a certain point may not be able to increase its production volume enough to bring its average cost down further. By engaging in international trade and selling to foreign markets in addition to the domestic one, a firm gains access to a far larger combined market, which allows it to raise its production volume, spread its fixed costs over many more units, and thereby achieve a lower average cost per unit than it could by serving the domestic market alone. This lower cost can, in turn, make the firm more price-competitive both at home and abroad, wh …

Students sometimes simply define 'economies of scale' without connecting it back to WHY international trade specifically helps achieve it — the answer must explicitly link the lar …