In addition to the positive welfare effects that free trade has on an economy, t

Question

In addition to the positive welfare effects that free trade has on an economy, there are a variety of other benefits of international trade. Consider the following scenario: Tabletop Ltd. is a firm operating in a small economy. If Tabletop Ltd. can produce more goods, it can do so at a lower cost per unit. When the economy opens itself up to international trade. Tabletop Ltd. is able to enjoy these lower costs since it can now serve a larger market. The previous scenario represents which of the following benefits of free trade? Enhanced flow of ideas Increased competition Lower costs through economies of scale Increased variety of goods

Explanation / Answer

Large production implies less cost of production. So, correct answer is lower cost through economies of scale.

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