Trade boosts welfare by optimizing technology choices for maximum gains.
This paper explores how international trade affects a country's economy by looking at how firms choose their production technologies. The study shows that trade generally benefits a country by increasing its overall welfare, especially in a two-sector model where one sector has constant returns to scale. The findings suggest that trade can lead to cost reductions in the manufacturing sector, ultimately improving the country's economic well-being. However, in cases where a country has external increasing returns, it may not always benefit from trade.