Question

what economy of scale is all about? how is related to international trade?

Answer 1

Step 1:
It is the benefit of the cost that is experienced by a firm when the level of output is increased. The benefit takes place as a result of the reverse relation between per-unit fixed cost and the produced amount of quantity.
As much as is the quantity produced of output, the bottom-most will be the fixed cost per unit.
It might also result in a decline in the average variable cost with increasing output.
It can be applied at any stage of production by the firm.
It reduces per-unit fixed as well as a variable cost.
Step 2:
International trade takes place because of existing economies of scale in production. When there are economies of scale, specialization, and trade in the production within an industry then it leads to improved world productive efficiency and benefits of welfare accruing to all trading counties.
Trade between countries does not depend upon the country's differences under the assumption of economies of scale. The economies of scale model help to explain trade between different countries like the US, Japan, etc.