ECON 1.1: Specialization and Trade

Why did Adam Smith call specialization (or division of labor) a key source of prosperity during the Industrial Revolution?

• It enabled governments to tax workers more easily

• It allowed individuals to earn more leisure time

• It increased productivity by focusing on tasks individuals did best

• It eliminated all forms of trade between regions

What does specialization allow workers or countries to do?

• Eliminate all need for trade

• Focus on tasks they perform more efficiently

• Avoid using technology in production

• Produce everything they need on their own

What is the economic model called that shows trade offs between producing two goods using resources efficiently?

• Demand supply curve

• Goods production matrix

• Production Possibilities Frontier (PPF)

• Opportunity loss diagram

What does it indicate when a country operates at a point inside the PPF curve?

• It is using all resources efficiently

• It is maximizing output of one good

• It is producing more than the curve allows

• It is using resources inefficiently

Which statement best describes comparative advantage?

• When one country produces all goods more efficiently than another

• When a country can produce a good at a lower opportunity cost

• When a country only trades with its neighbors

• When a nation has no trade barriers

Why do countries choose to specialize in certain goods?

• To reduce employment in other industries

• To avoid trading with other nations

• To focus on producing goods they can make most efficiently

• To ensure they produce everything they need

Which of the following summarizes the video’s main conclusion?

• Trade harms domestic production and jobs

• Specialization and trade together lead to higher global prosperity

• Self‑sufficiency is the most efficient economic strategy

• Only absolute advantage matters in global trade