If the cost of producing a product declines dramatically with increases in the level of output then:
A) economies of scale (EOS) may be a source of comparative advantage.
B) countries with a large internal market may be more likely to have a comparative advantage in the production of this product.
C) the level of output and comparative advantage are unrelated.
D) both a and b
E) both b and c

Question

Quizplus · Accepted Answer

Economies of scale (EOS) mean that as production increases, the cost per unit decreases. This can provide a comparative advantage, especially for countries with large internal markets that can produce at higher volumes.

If the Cost of Producing a Product Declines Dramatically with Increases