Chapter 24 Increasing returns imperfect competition and the positive theory of international trade This focuses on increasing returns imperfect competition and the positive theory of international trade. It describes the integrated economy approach to international trade. It is common in the expositions of the international trade theory to start by imagining two isolated countries which then are allowed to begin trade with each other. The integrated economy approach goes in the reverse direction starting from a unified economy and then breaking it up. Using the integrated economy approach it can be shown that the details of particular monopolistic competition models of trade such as the form of product differentiation do not matter when it comes to the description of the motives for and pattern of trade. In addition a picture of trade can be easily offered in which both economies of scale and comparative advantage are the motives for trade. The chapter presents a restatement of the integrated economy approach to the trade theory and presents a survey of other developments that cannot be treated within that approach. It also discusses the achievements and limits of the new trade theory.