How does increasing returns to scale in production provide an incentive for international trade?

Question

How does increasing returns to scale in production provide an incentive for international trade?

Answer 1

First of all, there is ALWAYS an incentive for international trade.

International trade is an example of a situation that always yields a Pareto improvement (a situation where both countries will be better off and no one will be hurt).  

Increasing returns to scale is a ridiculous situation, because it allows your output to increase more than the amount of inputs you are sticking into your production machine.  

Increasing returns to scale will encourage anyone with this magical machine to produce a ginormous amount of goods.  Obviously, if you can sell these enormous amounts of goods in other countries as well as your own, you will be even happier.

Hope this helps, and shame on whoever asked you this question.... It's illogical.