Economies of scale and International Trade: An overview Under increasing returns to scale Output grows proportionately more than the increase in all inputs Average costs(costs per unit) decline with the size of the market Copyright C 2003 Pearson Education, Inc Slide 6-5Copyright © 2003 Pearson Education, Inc. Slide 6-5 ▪ Under increasing returns to scale: • Output grows proportionately more than the increase in all inputs. • Average costs (costs per unit) decline with the size of the market. Economies of Scale and International Trade: An Overview