ECONOMICS
DIVISION OF LABOR AND SPECIALIZATION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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both parties gain as a result of voluntary exchange.
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both parties gain as a result of fraudulent exchange.
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neither party gains as specialization decreases efficiency.
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neither party gains as specialization decreases productivity.
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Detailed explanation-1: -Specialization reduces the cost of production. When an individual specializes to produce one good, and then acquires additional desired goods from other specialists, both parties gain as a result of voluntary exchange.
Detailed explanation-2: -Voluntary exchange is a transaction where two people trade goods or services freely, there is no coercive or restrictive force involved in the transaction. Both parties want to make the exchange items, and both parties will benefit from the trade. Voluntary exchange is an essential concept in the free market economy.
Detailed explanation-3: -Concept 7 explained that specialization creates a need for voluntary exchange. For example, a software programmer will only devote her scarce time to coding if she trusts that someone else is producing food she needs to survive – and she will be able to trade for them.
Detailed explanation-4: -Trade is the voluntary exchange of goods or services between different economic actors.
Detailed explanation-5: -Voluntary trade benefits all parties because it maximizes their freedom within the context of economic transactions. Specialization is a market economics concept that focuses on the production of one type of product by an economy.