Specialization and exchange result from differences in productivity that lead to
A) opportunity cost.
B) comparative advantage.
C) absolute advantage.
D) self-sufficiency.

Question

Quizplus · Accepted Answer

Specialization and exchange occur due to comparative advantage, which is a result of differences in productivity. Comparative advantage refers to the ability of a country, individual or firm to produce a particular good or service at a lower opportunity cost than its competitors. This means that even if a country or individual is not the most efficient in producing a particular good or service, it may still have a comparative advantage in that area and can benefit from specializing in that activity and trading with others.

Specialization and Exchange Result from Differences in Productivity That Lead