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. Why similar countries trade Aa Aa Consider two hypothetical countries called Cassvania and Koopmansville. The countries have similar resource endowments and production technology, and yet they specialize and trade with each other. Read the following details and determine why international trade is possible between these two countries. Koopmansville has many natural lakes and streams. As a result, its residents grow up on the water and have a natural sense of how boats should work and be made. Because of that knowledge, even though there is demand for canoes in both countries, all of the canoe factories have located themselves in Koopmansville to take advantage of local knowledge. Despite their similarities, Cassvania and Koopmansville are able to trade because of external economies of scale. external economies of scale increasing returns to scale

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External economies of scale in koopmansville because their knowledge will lead to reduction in average total cost decline because of skilled labor.

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