Specialization

What is an example of specialization?

• I decide to make every type of pie that I can

• I decide to spend my $20 to go out to dinner instead of the movies

• I stop playing basketball and baseball to focus on football

What would specialization look like for a company?

• Lululemon decides to focus solely on making athletic apparel

• Nike decides to start video game design

• A peach farming business adds apples and pears to its offerings

Which of the following is a benefit of specialization?

• More total output

• The economy becomes more efficient

• The marginal benefit decrease

• More scarce resources are created

What does the Law of Comparative Advantage state?

• If two countries both produce a mix of goods, instead of focusing on a particular, more will be produced.

• Trade is not beneficial for the economy

• If each country specializes in a good with a lowest opportunity cost, more overall items will be produced

True or False:

Whoever has the absolute advantage should always produce that good when comparing two countries/companies.

• True

• False