Final answer:
The international product life cycle theory explains how products go through different stages globally, affecting trade and economies. Small economies benefit from economies of scale and variety in international trade. Environmental issues often require international agreements due to the shared nature of costs and benefits.
Step-by-step explanation:
The international product life cycle theory describes how a product matures and sales fluctuate over time on an international scale. This theory is applicable in the context of international trade, where it can help small economies achieve economies of scale and benefit from increased competition and variety. By engaging in international trade, small economies can produce goods in larger quantities that are then exported, which lowers unit costs. Moreover, this trade also allows these economies to benefit from a range of products produced globally.
In relation to global environmental concerns, the prisoner's dilemma in Monopolistic Competition and Oligopoly demonstrates how international agreements are crucial for joint action. Without them, countries might choose not to bear the cost of environmental protection, given that the benefits are shared, leading to potentially suboptimal outcomes for all.