Question

A common pitfall that novice exporters come across involves:

a) Poor understanding of the domestic market
b) An ineffective distribution program
c) Low unit costs
d) Increased economies of scale

Answer 1

International trade enables small economies to benefit from economies of scale and competition. The option (D) is correct.

Step-by-step explanation:

The concept of economies of scale becomes especially relevant to international trade when it enables one or two large producers to supply the entire country.

For example, a single large automobile factory could probably supply all the cars consumers purchase in a smaller economy like the United Kingdom or Belgium in a given year. However, if a country has only one or two large factories producing cars, and no international trade, then consumers in that country would have relatively little choice between kinds of cars (other than the color of the paint and other nonessential options). Little or no competition will exist between different car manufacturers. Therefore, option (D) is correct.