Consider a country that wishes to consume a quantity

Q1,

which it can produce for an average cost per unit of

c1.

Suppose that this country has a comparative advantage in producing this product and can export the quantity

Q2

Q1,

if it produces

Q2.

The reduction of the average cost per unit from

c1

to

c2

as denoted by a movement from point "a" to point "d" is due to

A.

learning by doing.

B.

economies of scale.

C.

price discrimination.

D.

changing factor endowments.

E.

both A and B.

.....

Gains from Trade

OutputPerYearUnitCost(indollars)

LRAC1

a

LRAC2

Q1c1bcQ2c2d