Final answer:
International trade allows small economies to benefit from economies of scale, competition, and variety offered by several producers. By engaging in international trade, small economies can access larger markets, leading to increased production and cost savings through economies of scale. Competition from foreign producers stimulates innovation and improvement in product quality, benefiting consumers.
Step-by-step explanation:
International trade can allow even small economies to take full advantage of economies of scale, competition, and the variety offered by several producers. By engaging in international trade, small economies can access larger markets, leading to increased production and economies of scale. Moreover, competition from foreign producers can lead to improvements in product quality and lower prices for consumers.
For example, a small country that specializes in producing a specific product may have limited domestic demand. However, by exporting to other countries, it can tap into larger markets and increase its production scale. This enables the small economy to benefit from economies of scale, which can result in cost savings and improved efficiency.
Furthermore, international trade exposes domestic producers to competition from foreign firms, stimulating innovation, and driving them to improve their products and reduce prices. This competition benefits consumers who have access to a wider variety of goods and services at competitive prices.