Question

How come both countries are made better off if they specialize? Options:

A. Because specialization leads to increased competition.
B. Because it allows each country to focus on what it does best.
C. Because specialization reduces overall production.
D. Because it hinders economic growth.

Answer 1

Specialization in production allows countries to focus on their strengths, increasing their effectiveness and overall production. By trading, countries can benefit from each other's strengths and experience economic growth.

Step-by-step explanation:

Specialization in production allows countries to focus on the parts of the production process where they have an advantage, enabling them to be more effective than if they produce a combination of things. This is because people have different skills, talents, and interests, and specialization allows them to utilize their strengths.

For example, a country with a favorable climate for growing wheat can specialize in wheat production, while another country with a favorable climate for tourism can specialize in the hospitality industry. By specializing and trading, countries can benefit from each other's strengths and increase overall production and economic growth.

Answer 2

The statement is How come both countries are made better off if they specialize. The correct answer is Because it allows each country to focus on what it does best. The correct option is B.

Step-by-step explanation:

Specialization benefits both countries when they focus on what they do best. By specializing, each country can allocate its resources efficiently, leading to increased productivity and economic gains. This principle is rooted in the concept of comparative advantage, wherein countries specialize in producing goods or services where they have a lower opportunity cost.

Firstly, specializing allows countries to optimize their resource utilization. For instance, if Country A is more efficient in producing computers and Country B excels in manufacturing cars, both countries can concentrate on their respective strengths. This results in higher overall production and quality. The opportunity cost of producing each good is lower, leading to a more efficient allocation of resources.

Secondly, specialization fosters international trade, promoting mutual benefit. When countries trade based on their comparative advantages, they can access a wider variety of goods at lower costs. This exchange enhances economic welfare for both nations, as they can acquire goods at prices lower than the cost of production. This dynamic not only bolsters economic growth but also fosters cooperation and interdependence among nations.

In conclusion, the advantage of specialization lies in its ability to enhance efficiency, optimize resource allocation, and promote mutually beneficial international trade. By focusing on what each country does best, they contribute to a more productive and interconnected global economy.