Assume the case of 2 countries, 2 factors, 2 firms and 1 good. Both firms choose their production quantities simultaneously on the basis of their beliefs about their rival's choices. Each firm maximises its profit as a function of the rival's production. Assuming that the demand for the product is much higher in the foreign than in the home country, after moving from autarky to free trade the home country increases its production and its exports of the good. The foreign supplier continues to produce the same quantity as before trade and does not export. Making use of economies of scale, the producer in the home country is able to supply both the domestic market and a share of the foreign market. Please explain what the gains and losses from trade are in both countries as a consequence of the effects of economies of scale. Hint: Gains and losses of producers, exporters and consumers in both countries.