In addition to the trade doctrine of "economies of scale and imperfect competition," differences in technology as an exogenous variable have also been used to account for trade between developed industrial countries and between like products, as Makusen and Svenson (1985) assume in their study that resource allocation ratios and demand preferences are the same in both countries. proportions and demand preferences are the same. Product production requires more than two factor inputs, but does not have economies of scale. However, if there is some slight difference in production technology between the two countries, labor productivity will be slightly different. In trade between the two countries, each country will export the product whose factor productivity is relatively high.
Economies of scale are the economic benefits that result from firms producing on a large scale, resulting in lower costs. Traditional trade theories all assume constant returns to scale in product production and assume that international markets are perfectly competitive. Economists of scale argue that these assumptions are very different from reality. In modern social production, there are external economies of scale benefits (refers to the production cost savings or production efficiency gains obtained by a single enterprise as a result of the expansion of production scale of related output enterprises) to this enterprise; there are also internal economies of scale (refers to the production cost savings or production efficiency gains obtained by a single enterprise as a result of the expansion of its own production scale). Thus, the production of many products (especially knowledge-intensive products) is characterized by increasing returns to scale.
On the one hand, various products are similar and have certain substitutability, thus competing with each other; on the other hand, there are differences, thus each has a certain monopoly. In other words, the market is characterized by imperfect competition. Increasing economies of scale and imperfect competition market co-exist, on the one hand, to provide the basis for international trade, on the other hand, to bring more profits to enterprises. In order to obtain the benefits of economies of scale, it is necessary to participate in the international division of labor, there is a division of labor, there is trade.
