Meditations and Learnings

Meditations and Learnings

Foreign Trade Enables Economies of Scale

Economies of scale enable companies to spend vast amounts of money up-front because the quantity of their product keeps the sale prices low. Australia’s population is too small for a domestic car manufacturer to justify the massive investment in machinery, R&D, and a specialised labour force. Instead, the country benefits from international trade because car manufacturers from other countries can build in Australia. Without exports, even the established car manufacturers could not achieve the necessary economies of scale to make car development worthwhile.