cost of production of only $10 per toaster oven. Production plant V still has an average cost of production of $10 per

toaster oven. Thus, production plant M can produce toaster ovens more cheaply than plant S because of economies

of scale, and plants L or V can produce more cheaply than S or M because of economies of scale. However, the

economies of scale end at an output level of 150. Plant V, despite being larger, cannot produce more cheaply on

average than plant L.

The concept of economies of scale becomes especially relevant to international trade when it enables one or

two large producers to supply the entire country. For example, a single large automobile factory could probably

supply all the cars consumers purchase in a smaller economy like the United Kingdom or Belgium in a given

year. However, if a country has only one or two large factories producing cars, and no international trade, then
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