ECONOMICS
DIVISION OF LABOR AND SPECIALIZATION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Transportation costs are lower than they were a century ago.
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Resources are not evenly distributed among countries.
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Greater investment of capital goods increases productivity.
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People have limited resources to satisfy unlimited wants.
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Detailed explanation-1: -Whenever countries have different opportunity costs in production they can benefit from specialization and trade. Benefits of specialization include greater economic efficiency, consumer benefits, and opportunities for growth for competitive sectors.
Detailed explanation-2: -The idea of absolute advantage was developed by Scottish economist Adam Smith, who explained how countries can profit by only specializing in the goods and services they can produce efficiently. Smith suggested that countries can open up trade with others for products they can’t make efficiently on their own.
Detailed explanation-3: -Why don’t countries specialize in the production of just a few goods for which they have a comparative advantage? In most cases, increasing opportunity costs would accompany the continually increasing production of a product specialist.
Detailed explanation-4: -if a nation has an absolute advantage in the production of a good, it can produce that good using fewer resources than its trading partner. If a nation has a comparative advantage in the production of a good, it can produce that good at a lower opportunity cost than its trading partner.