scale and competing with each other. If the quantity demanded falls below 40,000, then the economy

by itself, without foreign trade, cannot take full advantage of economies of scale.

c. The simplest answer to this question is that the small country could have a large enough factory to

take full advantage of economies of scale, but then export most of the output. For semiconductors,

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countries like Taiwan and Korea have recently fit this description. Moreover, this country could also

import semiconductors from other countries which also have large factories, thus getting the benefits

of competition and variety. A slightly more complex answer is that the country can get these benefits

of economies of scale without producing semiconductors, but simply by buying semiconductors made

at low cost around the world. An economy, especially a smaller country, may well end up specializing
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