Question

1. (5) How does economies of scale lead to more economic growth if there is free trade?

Answer 1

Free trade means countries can import and export goods without any barriers to tariffs or other non-tariff trade barriers.

By fact, free trade allows lower commodity costs , increased production, profits from economies of scale and a greater variety of products. When countries can specialize in some goods, they can benefit from economies of scale and lower production costs; this is especially true in sectors that require high fixed costs or high investment rates. Ultimately, the advantages of economies of scale would lead to lower commodity prices and greater productivity for the exporting companies.

Free trade signifies further production. According to economists from the Bureau of Economic Analysis, at least half of US imports are not consumer goods; they are inputs for American producers. Freeing trade lowers the cost of import-input, thereby reducing the expense of manufacturing firms and stimulating economic growth.
Free trade increases productivity and boosts creativity. Over time , free trade combines with other business mechanisms to move labor and capital to more effective uses, enabling industry to flourish more efficiently. The results are higher incomes, investment in things like infrastructure and a more competitive economy that keeps generating new jobs and opportunities.