Final answer:
The cornerstone of trade is specialization which allows countries to produce goods more efficiently and participate in global trade, leveraging economies of scale. Factors affecting a nation's trade levels include the size of its economy, geographic location, and history of trade, all pivotal for globalization.
Step-by-step explanation:
The cornerstone of trade is specialization. It allows countries to focus on producing goods or services where they have a comparative advantage, resulting in more efficient production and exchange. Specialization can lead to economies of scale, meaning that as the volume of production increases, the cost per unit of the product decreases, and this can be vastly beneficial for smaller economies. International trade allows a small economy to specialise and produce on a larger scale without being limited by the size of its local market. Consumers also benefit from this arrangement as they receive a variety of products and competitive prices due to international competition.
Three factors that determine whether a nation has a higher or lower share of trade relative to its GDP are the size of its economy, geographic location, and its history of trade. Smaller economies often trade more relative to their GDP than larger economies because they cannot produce all their needs internally. Geographic proximity to other nations can reduce transportation costs, thus promoting trade, and well-established trade networks can increase a county's trade volume.
Scarcity plays a key role in economic choices and trade, leading to decisions on a global scale that answers the fundamental economic questions of what, how, and for whom to produce. Through specialization and trade, resources are allocated more efficiently on a global scale, encouraging globalization and the coordination of international resources.