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

and producing a few items on a large scale, but then trading those items for other items produced on a

large scale, and thus gaining the benefits of economies of scale by trade, as well as by direct

production.

7. A nation might restrict trade on imported products to protect an industry that is important for national

security. For example, nation X and nation Y may be geopolitical rivals, each with ambitions of increased

political and economic strength. Even if nation Y has comparative advantage in the production of missile

defense systems, it is unlikely that nation Y would seek to export those goods to nation X. It is also the case

that, for some nations, the production of a particular good is a key component of national identity. In
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