This paper offers a much simplified, yet at the same time, a lot more general model that not only reproduces the major insights emerging from the recent literature of trade with heterogeneous firms, yet at the same time goes much beyond. The paper helps streamline the key driving force behind the established insights while teasing out some of the unnecessary and complicating details in the existing literature. We show that the key driving force is that trade reallocates resources from less productive firms to more productive firms at the margin. To ensure that such a driving force works in equilibrium, however, consumers’ preferences need to demonstrate diminishing, rather than increasing (as in the typical case of CES preference), marginal utility over variety. Moreover, despite this marginal resource reallocation effect of trade, in equilibrium trade may crowd in, rather than crowd out, less productive firms; firms may be endogenously differentiated into pure exporters, domestic producers, producers serving both domestic and export markets even without the presence of trade cost; average productivity weighted by output share can decline, and even if it increases, it may bear no relation to the magnitude of welfare gains from trade. Our paper also demonstrates that the central distinction between gains from trade with heterogeneous firms and the comparative advantage-based gains from trade lies in the fact that trade brings nothing new in the latter, whereas in the former case trade brings something new.