KSA Economics - Specialization, Trade, & Incentives

How does specialization improve production?

• Requiring employees to learn all aspects of the production process increases efficiency

• Having employees focus on one aspect of production increases efficiency

How does specialization affect consumer price?

• Specialization generally lowers consumer prices due to increased efficiency and reduced production costs.
• Specialization generally increases consumer prices due to higher demand and to offset costs for training the workforce.

What is comparative advantage?

• Comparative advantage is the ability of a country or business to carry out a particular economic activity more efficiently than another activity.

• Comparative advantage is the ability to produce more of a good than another nation, individual or group without creating trade barriers.

How does comparative advantage affect trade?

• Comparative advantage leads to countries producing everything equally, reducing trade barriers and preventing conflict.

• Comparative advantage promotes trade by encouraging countries to specialize in producing goods they can make most efficiently.

What is opportunity cost?

• Opportunity cost is the total cost of all the factors of production.

• Opportunity cost is the value of the next best alternative that is given up.

How may free trade benefit a country?

• Free trade leads to higher prices and reduced product variety, allowing a nation to refocus production efforts on efficiency.

• Free trade benefits a country by enhancing economic efficiency, lowering prices, increasing product variety, and fostering innovation.

How may economic growth influence political conditions?

• Increased trade and investment can lead to job creation and improved living standards which would ideally create political stability.

• Economic growth in the manufacturing and service industries typically lead to an increase in income inequalities among the social classes.

How may trade wars affect the economy?

• Trade Wars can lead to lower prices for consumers by preventing tariffs on American exports, regulating international exchange rates, and developing a comparative advantage.

• Trade Wars can negatively impact the economy by increasing costs, reducing consumer purchasing power, disrupting supply chains, and creating uncertainty for businesses.

What is economic interdependence?

• Economic interdependence is the mutual reliance between countries or economies in terms of trade, investment, and economic activities.
• Economic interdependence refers to a country's self-sufficiency in producing all its goods; thereby, eliminating the need for international trade.

How may the government adjust economic policies based on international trends?

• Governments may implement protectionist measures like tariffs during trade Wars or loosen restrictions to encourage foreign investment.

• Governments may enforce economic sanctions on nations that provide humanitarian aid to developing nations to encourage political stability.